Liberalisation Introduction, Features, Objectives, Advantages and Disadvantages

In Indian viewpoint, it is very difficult to establish that the process of economic liberalization taken up by the government of India in 1990’s has really brought huge economic gains to India. The process has brought some benefits through suffers from some deficiencies. New economic policy aimed to accomplish economic stabilization and to convert the economic policies in to a market economy by removing all kinds of unnecessary restrictions.

• Imports had increased by 2.3% of GDP, while exports had increased by a mere 0.3% of GDP.
• This helped in the growth of the economy but also made it vulnerable to a competitive business environment.
• In India, economic liberalisation is initiated in 1991 with the goal of making the economy more market-oriented and expanding the role of private and foreign investment.
• Broadly speaking, Globalisation means the interaction of the domestic economy with the rest of the world with regard to foreign investment, trade, production and financial matters.
• To maximize India’s economic potential by encouraging multinational and private companies to expand.
• The process of removing barriers of trade is called liberalisation and removal of trade barriers results in the phenomenon of globalisation.

The attempt here is to create a borderless world in which goods, services, and people move seamlessly across borders. This has been achieved using the latest technologies that enable people to connect with each other from parts of the world. Globalization is the last step that is made https://1investing.in/ possible by the implementation of liberalization and privatization. It includes opening the boundaries for multinational companies to start manufacturing and retailing in the country. It also allows domestic companies to grow and reach international levels in terms of business.

Privatisation

Alongside India, several other countries like Iceland, France, the UK, and the USA have a mixed economy. Moreover, India is not dramatically different from the rest of the world in this respect. One of the key findings of Plouffe was that firms that undertake both imports and exports are generally more productive.

The Indian rupee’s depreciation against foreign currencies increased the supply of foreign exchange in the Indian economy. It was done primarily to boost exports and, ultimately, to increase foreign exchange reserves. To summarize, it can be reviewed that economy of country depends on industrialization.

What you mean by liberalization?

Number of industries reserved for public sector was reduces from 17 to 2. New Economic Policy of India was launched in the year 1991 under the leadership of P. This policy opened the door of the India Economy for the global exposure for the first time. In this New Economic the slope of iso-quant explains Policy P. V. Narasimha Rao government reduced the import duties, opened reserved sector for the private players, devalued the Indian currency to increase the export. Local industries also took a hit owing to increased competition from private and international players.

Earlier, the investors had to encounter difficulties to enter countries with many barriers. These barriers included tax laws, foreign investment restrictions, acco`unting regulations, and legal issues. Economic liberalisation reduced all these obstacles and waived a few restrictions over the control of the economy to the private sector. The reforms have also been criticised for worsening rural living standards and unemployment and for increasing inequality and concentration of wealth. Deregulation entails managing and supervising the economy in a manner that would largely be a hands off approach combined with oversight over its functioning related to legal and compliance aspects alone. Alternatively, deregulation means that the governments do not obstruct with the businesses in a day-to-day manner and act only when specific objections against businesses are brought before them.

The Term Liberalization – Introduction and Explanation

It is easy to discern from here that most Indian manufacturing firms are not very productive, thus hindering their transition from domestic to export markets. But more importantly, this has a bearing on their political behaviour as well. Given that a majority of firms have a strictly domestic orientation, the scale of lobbying in favour of trade protectionism is going to be much larger than that of pro-liberalisation. The conventional idea is that most of trade protectionism could be explained by the government’s decision to sell it for political contributions.

• The education and health sectors did not see much growth, and this has been a point of criticism.
• This is the first part of India’s low-productivity vicious cycle.
• To elaborate, heavy industries like atomic energy and defence equipment come under the purview of the public sector.
• Specific changes embrace a reduction in import tariffs, deregulation of markets, discount of taxes, and larger overseas funding.
• Liberalization is defined as legal guidelines or guidelines being liberalized, or relaxed, by a authorities.

The companies had the liberty to decide the size and scale of production along with the price of its products. –Globalisation is a process driven by international trade which leads to interaction between companies, people, and the governments of different nations. When it comes to discussing the impacts of liberalization, it is crucial to look at both the positive and negative ramifications on our country’s economy. Abolition of the previously existing License Raj in the country. License or Permit Raj is a complicated system of regulations, licenses, and restrictions that were imposed to run and set up businesses between 1947 and 1990.

What is globalization

Regarding industrial policies, it is obvious from the development of business policy that the governmental role in improvement has been widespread. The path to be followed in the direction of industrial growth has evolved over time. In early levels, the government adopted an inward looking development coverage which enforced the Indian business to have low and inferior technology and throttled the expansion of private sector. It disallowed the domestic industries from extreme competitors and due to this fact resulted in low productiveness and restricted its ability to broaden employment prospects. It is well recognised in management literature that liberalization entails elimination of state control over economic activities.

In simple words, liberalisation refers to a relaxation of government restrictions in the areas of social, political and economic policies. In the context of economic policy, liberalization refers to lessening of government regulations and restrictions for greater participation by private entities. It is not denying the fact that initially, the policy of licenses, permits, and quotas yielded some good results, but the end result was disappointing. While public sector enterprises became the breeding centers of corruption and inefficiencies, the private sector , failed to diversify or modernize. India has been a member of the World Trade Organization since January 1995. According to the WTO, members receive a guarantee that their exports will be treated fairly by other members, and each member promises to do the same with imports.

According to Monopolies and Restrictive Trade Practices Act 1969, all those companies having assets worth Rs. 100 crore or more were called MRTP firms and were subjected to several restrictions. The LPG reforms include Liberalization, Privatization, and Globalization. These are measures undertaken to improve the economic condition of a country. These reforms were initiated by the Indian government in 1991 under the New Economic Policy. Growth of industries – LPG has led to an increase in the number of industries and, at the same time, strengthened the existing ones.

Structural measures are long-term policies and these drastically affect the economy in the long run. These included liberalization, privatization, and globalization. In addition to this, the uncertain political situation in the country only added fuel to the fire.

Poor fiscal management was one of the main reasons for the economy’s downfall. The government spent more than what it was earning in the 1980s, which led to declining foreign reserves. Most of the funds were used for developmental activities that did not create any revenue. Increased competition – The influx of goods from other countries increases the competition in the domestic market.

Deregulation policy was designed to restructure and diversify the productivity of the economy in order to reduce dependency on the oil sector and also to achieve fiscal and balance of payment viability. Additionally, it lays basis for sustainable non-inflationary or minimal inflationary growth rate. Deregulation offers the consumer in the form of lower prices, more providers and better products. A company that was not performing well and maintained only a small market share before deregulation would also be likely to benefit from this act. When the company faces fewer restrictions, it might be able to explore opportunities that the government had previously not allowed or severely restricted. The businesses are left to themselves to determine their operational processes and strategic imperatives without the government interfering in their working.