The economic liberalisation in India refers to the ongoing economic

liberalisation, initiated in 1991, of the country's economic policies, with the

goal of making the economy more market-oriented and expanding the role
of private and foreign investment. Specific changes include a reduction in
import tariffs, deregulation of markets, reduction of taxes, and greater
foreign investment. Liberalisation has been credited by its proponents for
the high economic growth recorded by the country in the 1990s and 2000s.
Its opponents have blamed it for increased poverty, inequality and
economic degradation. The overall direction of liberalisation has since
remained the same, irrespective of the ruling party, although no party has
yet solved a variety of politically difficult issues, such as liberalising labour
laws and reducing agricultural subsidies.[1] There exists a lively debate in
India as to what made the economic reforms sustainable. [2]
Indian government coalitions have been advised to continue liberalisation.
Before

2015

India

grew

at

slower

pace

than Chinawhich

has

been liberalising its economy since 1978.[3]But in year 2015 India outpaced
china in terms of GDP growth rate. [4]The McKinsey Quarterly states that
removing main obstacles "would free India's economy to grow as fast as
China's, at 10% a year".[5]
There has been significant debate, however, around liberalisation as an
inclusive economic growth strategy. Since 1992, income inequality has
deepened in India with consumption among the poorest staying stable
while the wealthiest generate consumption growth. [6] As India's gross
domestic product (GDP) growth rate became lowest in 2012-13 over a
decade, growing merely at 5.1%, [7] more criticism of India's economic
reforms surfaced, as it apparently failed to address employment growth,
nutritional values in terms of food intake in calories, and also exports
growth - and thereby leading to a worsening level ofcurrent account
deficit compared to the prior to the reform period. [8] But then in FY 2013-14
the growth rebounded to 6.9% and then in 2014-15 it rose to 7.3% as a
result of the reforms put by the New Government which led to the economy
becoming healthy again and the current account deficit coming in control.

Growth reached 7.5% in the Jan-Mar quarter of 2015 before slowing to

7.0% in Apr-Jun quarter.
Pre-liberalisation policies
ndian economic policy after independence was influenced by the colonial
experience (which was seen by Indian leaders as exploitative in nature)
and by those leaders' exposure to Fabian socialism. Policy tended
towards protectionism, with a strong emphasis on import substitution,
industrialisation under state monitoring, state intervention at the micro level
in all businesses especially in labour and financial markets, a large public
sector, business regulation, andcentral planning.[9] Five-Year Plans of
India resembled central planning in theSoviet Union. Steel, mining,
machine tools, water, telecommunications, insurance, and electrical plants,
among other industries, were effectively nationalised in the mid-1950s.
[10]

Elaborate licences, regulations and the accompanying red tape,

commonly referred to as Licence Raj, were required to set up business

in Indiabetween 1947 and 1990.
Attempts were made to liberalise the economy in 1966 and 1985. The first
attempt was reversed in 1967. Thereafter, a stronger version of socialism
was adopted. The second major attempt was in 1985 by prime
minister Rajiv Gandhi. The process came to a halt in 1987, though 1967
style reversal did not take place.[13]
In the 80s, the government led by Rajiv Gandhi started light reforms. The
government slightly reduced Licence Raj and also promoted the growth of
the telecommunications and software industries.[14]
The Chandra Shekhar Singh government (19901991) took several
significant steps towards the much needed reforms and laid its foundation.
[15]

Impact[edit]

The low annual growth rate of the economy of India before 1980,
which stagnated around 3.5% from 1950s to 1980s, while per capita
income

averaged

5%, Indonesia by

1.3%.[16] At

the

9%, Thailand by

same

time, Pakistan grew

9%, South

Korea by

by
10%

and Taiwan by 12%.[17]

Only four or five licences would be given for steel, electrical power
and communications. Licence owners built up huge powerful empires.
[12]

A huge private sector emerged. State-owned enterprises made large

losses.[12]

Income Tax Department and Customs Department became efficient

in checking tax evasion.[citation needed]

Infrastructure investment was poor because of the public sector

monopoly.[12]

Licence

Raj

established

the

"irresponsible,

self-perpetuating

bureaucracy that still exists throughout much of the country" [18] and
corruption flourished under this system.[19]
Economic Liberalisation of 1991[edit]
In response, Prime Minister Narasimha Rao, along with his finance
minister Manmohan Singh, initiated the economic liberalisation of 1991.
The reforms did away with the Licence Raj, reduced tariffs and interest
rates and ended many public monopolies, allowing automatic approval
of foreign direct investment in many sectors.[28] Since then, the overall
thrust of liberalisation has remained the same, although no government
has tried to take on powerful lobbies such as trade unions and farmers, on
contentious issues such as reforming labour laws and reducing agricultural
subsidies.[29] By the turn of the 21st century, India had progressed towards

a free-market economy, with a substantial reduction in state control of the

economy

and

increased

financial

liberalisation. [30] This

has

been

accompanied by increases in life expectancy, literacy rates and food

security, although urban residents have benefited more than rural
residents.[31]
The impact of these reforms may be gauged from the fact that total foreign
investment(including foreign direct investment, portfolio investment, and
investment raised oninternational capital markets) in India grew from a
minuscule US$132 million in 199192 to $5.3 billion in 199596.[38]
Annual growth in GDP per capita has accelerated from just 1 per cent in
the three decades after Independence to 7 per cent currently, a rate of
growth that will double average income in a decade.... In service sectors
where government regulation has been eased significantly or is less
burdensomesuch as communications, insurance, asset management
and information technologyoutput has grown rapidly, with exports
ofinformation technology enabled services particularly strong. In those
infrastructure sectors which have been opened to competition, such
astelecoms and civil aviation, the private sector has proven to be extremely
effective and growth has been phenomenal.

India had the distinction of being the world's largest economy in the
beginning of Christian era, as it accounted for about 32.9% share of world
GDP and about 17% of the world population. [1] The goods produced in India
had long been exported to far off destinations across the world.
[2]

Therefore, the concept of globalisation is hardly new to India.

India currently accounts for 2.7% of World Trade (as of 2015), up from
1.2% in 2006 according to the World Trade Organisation (WTO).[3] Until the
liberalisation of 1991, India was largely and intentionally isolated from the
world markets, to protect its fledgling economy and to achieve self-reliance.
Foreign trade was subject to import tariffs, export taxes and quantitative
restrictions, while foreign direct investment was restricted by upper-limit
equity participation, restrictions on technology transfer, export obligations
and government approvals; these approvals were needed for nearly 60% of
new FDI in the industrial sector.[4] The restrictions ensured that FDI
averaged only around $200M annually between 1985 and 1991; a large
percentage of the capital flows consisted of foreign aid, commercial
borrowing and deposits of non-resident Indians.[5]
India's exports were stagnant for the first 15 years after independence, due
to the predominance of tea, jute and cotton manufactures, demand for
which was generally inelastic. Imports in the same period consisted
predominantly of machinery, equipment and raw materials, due to nascent
industrialisation. Since liberalisation, the value of India's international trade
has become more broad-based and has risen to
04 from

12.50 billion in 195051.[citation

needed]

63,0801 billion in 2003

India's trading partners are

China, the US, the UAE, the UK, Japan and the EU. [6] The exports during
April 2007 were $12.31 billion up by 16% and import were $17.68 billion
with an increase of 18.06% over the previous year.[7]
India is a founding-member of General Agreement on Tariffs and
Trade (GATT) since 1947 and its successor, the World Trade Organisation.
While participating actively in its general council meetings, India has been
crucial in voicing the concerns of the developing world. For instance, India

has continued its opposition to the inclusion of such matters as labour and
environment issues and other non-tariff barriers into the WTO policies.[8]
Despite reducing import restrictions several times in the 2000s, [9][10] India
was evaluated by the World Trade Organisation in 2008 as more restrictive
than similar developing economies, such as Brazil, China, and Russia. The
WTO also identified electricity shortages and inadequate transportation
infrastructure as significant constraints on trade. [11][12][13] Its restrictiveness
has been cited as a factor which has isolated it from the global financial
crisis of 20082009 more than other countries, even though it has reduced
ongoing economic growth.[14]
Payments[edit]
Since

independence,

India's balance

of

payments on

its current

account has been negative. Since liberalisation in the 1990s (precipitated

by a balance of payment crisis), India's exports have been consistently
rising, covering 80.3% of its imports in 200203, up from 66.2% in 1990
91. Although India is still a net importer, since 199697, its overall balance
of payments (i.e., including the capital account balance), has been positive,
largely on account of increased foreign direct investment and deposits
from non-resident Indians; until this time, the overall balance was only
occasionally positive on account of external assistance and commercial
borrowings. As a result, India's foreign currency reserves stood at $285
billion in 2008, which could be used in infrastructural development of the
country if used effectively.
India's reliance on external assistance and commercial borrowings has
decreased since 199192, and since 200203, it has gradually been
repaying these debts. Declining interest rates and reduced borrowings
decreased India's debt service ratio to 4.5% in 2007. In India, External
Commercial Borrowings (ECBs) are being permitted by the Government for
providing an additional source of funds to Indian corporates. The Ministry of
Finance monitors and regulates these borrowings (ECBs) through ECB
policy guidelines.

Investment[edit]
Foreign direct investment in India has reached 2% of GDP, compared with
0.1% in 1990, and Indian investment in other countries rose sharply in
2006.[17]
As the third-largest economy in the world in PPP terms, India is a preferred
destination for foreign direct investments (FDI);[18] India has strengths in
information technology and other significant areas such as auto
components, chemicals, apparels, pharmaceuticals, and jewelry. Despite a
surge in foreign investments, rigid FDI policies resulted in a significant
hindrance. However, due to some positive economic reforms aimed at
deregulating the economy and stimulating foreign investment, India has
positioned itself as one of the front-runners of the rapidly growing Asia
Pacific Region.[18] India has a large pool of skilled managerial and technical
expertise. The size of the middle-class population stands at 50 million and
represents a growing consumer market.[19]
India's liberalised FDI policy as of 2005 allowed up to a 100% FDI stake in
ventures. Industrial policy reforms have substantially reduced industrial
licensing requirements, removed restrictions on expansion and facilitated
easy access to foreign technology and foreign direct investment FDI. The
upward moving growth curve of the real-estate sector owes some credit to
a booming economy and liberalised FDI regime. In March 2005, the
government amended the rules to allow 100 per cent FDI in the
construction business.[20] This automatic route has been permitted in
townships, housing, built-up infrastructure and construction development
projects including housing, commercial premises, hotels, resorts, hospitals,
educational institutions, recreational facilities, and city- and regional-level
infrastructure.
A number of changes were approved on the FDI policy to remove the caps
in most sectors. Fields which require relaxation in FDI restrictions include
civil aviation, construction development, industrial parks, petroleum and
natural gas, commodity exchanges, credit-information services and mining.

But this still leaves an unfinished agenda of permitting greater foreign

investment in politically sensitive areas such as insurance and retailing.
FDI inflows into India reached a record US$19.5bn in fiscal year 2006/07
(AprilMarch), according to the government's Secretariat for Industrial
Assistance. This was more than double the total of US$7.8bn in the
previous fiscal year. The FDI inflow for 2007-08 has been reported as
$24bn[21] and for 2008-09, it is expected to be above $35 billion. [22] A critical
factor in determining India's continued economic growth and realising the
potential to be an economic superpower is going to depend on how the
government can create incentives for FDI flow across a large number of
sectors in India.[23] In September 2012 the government approved 51% FDI
in multi-brand retails despite a lot of pressure from coalition parties. [24]

he Important Reform Measures (Step Towards liberalization

privatization and Globalization)
Indian economy was in deep crisis in July 1991, when foreign currency
reserves had plummeted to almost $1 billion; Inflation had roared to an
annual rate of 17 percent; fiscal deficit was very high and had become
unsustainable; foreign investors and NRIs had lost confidence in Indian
Economy. Capital was flying out of the country and we were close to
defaulting on loans. Along with these bottlenecks at home, many
unforeseeable changes swept the economies of nations in Western and
Eastern Europe, South East Asia, Latin America and elsewhere, around the
same time. These were the economic compulsions at home and abroad that
called for a complete overhauling of our economic policies and programs.
Major measures initiated as a part of the liberalization and globalization
strategy in the early nineties included the following:
Devaluation: The first step towards globalization was taken with the
announcement of the devaluation of Indian currency by 18-19 percent
against major currencies in the international foreign exchange market. In
fact, this measure was taken in order to resolve the BOP crisis

Disinvestment-In order to make the process of globalization smooth,

privatization and liberalization policies are moving along as well. Under
the

privatization

scheme,

most

of

the

public

sector

undertakings have been/ are being sold to private sector

(3) Effect on Agricultural sector:
The globalisation of trade in the agricultural sector is perhaps proving to be
a big blunder. The farmers will have to pay a very heavy price, for better
variety of imported seeds having resistance to diseases, because of the
patent rights imposed by WTO.
Over and above, the Indian farmer cannot export their products to rich
countries because of inferior technology and stringent quality parameters
imposed by foreign consumers. The large scale suicide by Indian farmers
in Karnataka, Punjab and Haryana under the burden of heavy loans is
directly attributed to this.
The Indian agriculture is almost on its deathbed. The minimum cost of
eatable rice is Rs.12 per kg and apples from Australia at Rs. 100 to Rs.150
per kg cannot be afforded by poor.
(4) Effect on Employment sector:
The employment scenario in India is probably the worst in recent years due
to globalisation. The restrictions of use of child labour and fair pay to
workers have a badly affected the traditional industries like cottage,
handloom, artisans and carving, carpet, jewellery, ceramic, and glassware
etc., where the specialised skills inherited for generations were passed on
to the next generation from the early age of 6 to 7 years. The globalisation
and trade restrictions under the influence of WTO have virtually killed
business in these sectors.

Conclusion: (Positive aspects):

Though globalisation and liberalisation of trade have resulted in the
availability of large number of quality products at reasonable price, the
overall economic benefits are negated due to the slow death of small scale
and traditional goods producing sectors employing a large population.
The rising cost of basic sustenance products like garments, footwear,
cereals, edible oils, petrol and kerosene, medicines and health care items,
decrease in farm output, decrease in purchasing power of poor are some of
the alarming issues that have given rise to serious doubts about the
benefits of globalisation.

Privatization, also spelled privatisation (in British English), may have several
meanings. Primarily, it is the process of transferring ownership of a business,
enterprise, agency, public service, or public property from the public sector (a
government) to the private sector, either to a business that operates for a profit or to
a nonprofit organization. It may also mean the government outsourcing of services or
functions to private firms, e.g. revenue collection, law enforcement, and prison
management.[1]
Privatization has also been used to describe two unrelated transactions. The first is
the buying of all outstanding shares of a publicly traded company by a single entity,
making the company privately owned. This is often described asprivate equity. The
second is a demutualization of a mutual organization or cooperative to form a jointstock company.[2]
There are five main methods[citation needed] of privatization:
1. Share issue privatization (sip) - selling shares on the stock market
2. Asset sale privatization - selling an entire organization (or part of it) to a
strategic investor, usually by auction or by using the Treuhand model
3. Voucher privatization - distributing shares of ownership to all citizens, usually
for free or at a very low price.

4. Privatization from below - Start-up of new private businesses in formerly

socialist countries.
5. Management buyout or Employee Buyout (MEBO) - distributing shares for free
or at a very low price to workers or management in the organization.
Choice of sale method is influenced by the capital market, political, and firm-specific
factors. SIPs are more likely to be used when capital markets are more developed.
Share

issues

can

broaden

and

deepen

domestic

capital

markets,

boosting liquidity and (potentially) economic growth, but if the capital markets are
insufficiently developed it may be difficult to find enough buyers, and transaction costs
(e.g. underpricing required) may be higher. For this reason, many governments elect
for listings in the more developed and liquid markets, for example Euronext, and
the London, New York and Hong Kong stock exchanges.
As a result of higher political and currency risk deterring foreign investors, asset sales
occur more commonly in developing countries and transition countries.
Voucher privatization has mainly occurred in the transition economies of Central and
Eastern

Europe,

such

as Russia, Poland,

the Czech

Republic,

and Slovakia.

Additionally, Privatization from below is/has been an important type of economic

growth in transition economies.
A substantial benefit of share or asset-sale privatizations is that bidders compete to
offer the highest price, creating income for the state in addition to tax revenues.
Voucher privatizations, on the other hand, could be a genuine transfer of assets to the
general population, creating a real sense of participation and inclusion. If the transfer
of vouchers is permitted, a market in vouchers could be created, with investors
offering to pay money for them.

Globalization
Everyone, I have gathered you here today because I have an important
announcement. As your CEO, I have to make tough decisions at times. These
decisions are made in the best interest of the organization and consider the effects to
all parties involved.
We live in an increasingly integrated society, one in which globalization continues to
increase. Globalizationis the increasing movement of goods, services and capital

across national borders. Information technology has been a driving force of

globalization. Advances in software, hardware, Internet and telecommunications have
made it easier and faster for companies to communicate with employees, partners and
suppliers from all over the globe in real time. Information technology facilitates greater
efficiency and productivity and enables new innovations to spread quickly.
One of the costs of globalization is job security. Increasingly, jobs are moved across
borders where there is cheaper labor, few environmental and labor laws and weak
regulations regarding health and safety. Many jobs in the domestic economy are lost
or wages are lowered to stay competitive with foreign rivals.

Outsourcing
Additionally, our organization has decided to outsource its IT department in an effort to
save money. What does this mean? Well, outsourcing is taking a workplace activity
once performed inside the organization and moving it outside of the organization.
Deciding whether or not to outsource was a difficult strategic decision that the
company had to make. There are various advantages and disadvantages of
outsourcing. IT outsourcing can provide a number of benefits including cost savings,
increased technical competence and a competitive advantage. Outsourcing IT can
lessen the burden of routine tasks and allow the organization to focus on key IT
activities. It can increase flexibility while reducing the costs associated with staying upto-date on technological advancements. Service providers often encounter more
problems and obstacles and will be able to better address issues given their wide
array of knowledge and skills. We feel that outsourcing will reduce costs such as
operating expenses, increase flexibility, improve management focus and quality of
service and provide access to the latest technology.
A main risk of outsourcing is security of information. Information security centers
around three parts: integrity, availability and confidentiality. Information should be
accurate and safeguarded. Only authorized personnel should have access to the

information when the situation warrants it, and only those authorized to access the
information should be able to get to it. Once an organization outsources to a vendor,
they have little control, if any, on how that vendor handles their information and keeps
it secure.