LIBERALISATION,PRIVATISATION AND

GLOBALISATION
INTRODUCTIO
N
July 1991,India has taken a series of measures to structure
the economy and improve the BOP position. The new
economic policy introduced changes in several areas.
The policy have salient feature which are: -
1.Liberlisation (internal and external)
2.Extending Privatization
3.Globalisation of the economy
Which are known as LPG . (liberalization privatization
globalization)


Reasons for implementing LPG :

Excess of consumption and expenditure over revenue resulting in heavy govt.
borrowings.

Growing inefficiency on the use of resources.

Over protection to industries.

Mismanagement of the firm and the economy.

Increase in losses for public sector enterprises.

Various distortion like poor technological development, shortage of foreign exchange
and borrowing from abroad.

Low foreign exchange reserves.

Inflation


LIBERALIZATION
Liberalization is a very broad term that usually
refers to fewer government regulations and
restrictions in the economy in exchange for
greater participation of private entities

Liberalization refers to the relaxation of the
previous government restriction usually in area of
social and economic policies. When government
liberalized trade , it means it has removed the
tariff ,subsidies and other restriction on the flow of
goods and services between the countries.


Measures taken for liberalization
Liberalization for industrial licensing

Concession from monopolies act

Freedom for expansion and production to industries

Increase in the investment limit of the small industries

Freedom to import the capital goods and raw material

Freedom to import technology

Liberalization of export and import transactions

Liberalization in taxation policy

Liberalization in banking sector

ADVANTAGE
Industrial licensing

Increase the foreign investment.

Increase the foreign exchange reserve.

Increase in consumption and Control over price.

Reduction in dependence on external commercial borrowings

Competition promotes efficiency, so resources are wasted much less

Liberalization allows financial markets to provide loans to people who previously may
not have been able to access loans that they can pay off, and it allows more financial
instruments to be developed so people can choose the one that suits them

Liberalization removes government regulations on the economy, which
promotes jobs, lower prices, higher incomes and lowers inflation.

Promotes technological advancement, again creating jobs and growing incomes

DISADVANTAGE
Increase in unemployment.

Loss to domestic units.

Increase dependence on foreign nations

Unbalanced development
Name of the enterprise situation
National Thermal Power Corporation profit
Indian Oil Corporation profit
Manager Telephone Nigam Limited profit
Steel authority India limited profit
Bharat petroleum corporation limited profit
Hindustan petroleum corporation limited profit
Bharat heavy electronics limited profit PRIVATIZATIO
N
Privatization means transfer of ownership and/or
management of an enterprise from the public sector
to the private sector .It also means the withdrawal of
the state from an industry or sector partially or fully.
Privatization is opening up of an industry that has
been reserved for public sector to the private sector.

Privatization means replacing government
monopolies with the competitive pressures of the
marketplace to encourage efficiency, quality and
innovation in the delivery of goods and services .













Different Ways in privatization:

Liberalization Approach
Relative Share Enlargement Approach
Association of Private Sector Management Approach
Transfer of Minority Equity Ownership Approach
Transfer of Complete Ownership Approach

METHODS
FRANCHISING





LEASING
CONTRACTING
DISINVESTMENT
ADVANTAGE
Privatization helps to reduce the burden on Govt.
It will help profit making public sector unit to modernize and diversify
their business.
It will help in making public sector unit more competitive.
It will help to improving the quality of decision making, because the decisions are free
from any political interference.
It Encourage the new innovations without any restrictions.
Industrial growth.




Increase the foreign
investment.


Increase in efficiency


DISADVANTAGE

Lack of welfare.

Class struggle.

Increase in inequality

Opposition by employees.

Problem of financing.

Problem in unemployment.

Ignores the weaker sections.

Ignores the national importance
EXAMPLE
Lagan jute machinery company limited(LJMC)
o Vides Sanchar Nigam limited (VSNL)
o Hindustan zinc limited (HZL)
Hotel corporation limited of India (HCL)
Bharat aluminum company limited(BACLO)
GLOBALIZATION
Globalization implies integration of the economy of the
country with the rest of the world economy and opening up of
the economy for foreign direct investment by liberalizing the
rules and regulations and by creating favorable socio-
economic and political climate for global business.

According to IMF: -
The growing economic interdependence of countries worldwide
through increasing volume and variety of cross border
transaction in goods and services and of international capital
cash flows, and through the more rapid and widespread
diffusion of technology.

FEATURES
Opening and planning to expand business
throughout the world.
Erasing the difference between domestic and
foreign market
Buying and selling goods and services from / to
any countries in the world.
Locating the production and other physical
facilities on a considerations of the global
business dynamics, irrespective of national
considerations
Global sourcing of factors of production i.e. raw
material, components ,machinery, technology,
finance etc. are obtained from the best source
anywhere in the world
Global orientation of organizational structure and
management culture

Technological Advances in communication

Improvements in transportation and Technology

other Factors:


ADVANTAGE
Increase in Trade in Goods and Services
Free flow of technology
Increase in industrialization
Increase in production and higher standard of living.
Commodities at lower price with high quality
Increase in jobs and incomes
Balanced human development





DISADVANTAGE
Loss of domestic industries
Exploits human resources
Decline in income
o Transfer of natural resources
Widening gap between rich and poor
Dominance of foreign institute

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