Liberalization privatization globalization

Liberalization refers to the relaxation of previous government restrictions, usually in areas of social or economic policy. It can be also refereed as laws restricting (for example divorce, drugs etc..)in the arena of social policy.It is used to refer economic liberalization or capital market liberalization

Economic liberalization In developing countries it refers to opening up of there respective

economies to foreign capital and investments.

Three of the fastest developing economies today : CHINA, BRAZIL

&INDIA.

These countries have achieved rapid growth in the past several years

and decades after they have liberalized their economies to foreign

capital.

Many countries have no choice other than liberalize their economies

inorder to remain competitive in attracting and retaining their both

domestic and foreign investments

Policies that make an economy open to trade and

investment to rest of the world are needed for the

sustained economic growth…

There are evidences that proves the countries that

are outward-oriented tend to grow consistently in a

more faster manner than countries that are inward-

oriented.

IMPACT ON INDIAN ECONOMYTotal foreign investment (including 

foreign direct investment, portfolio investment, and investment raised on international capital markets) in India grew from US$132 million in 1991–92 to $5.3 billion in 1995–96.

Citieslike NOIDA, Gurgaon, Gaziabad, Bangalore, Hyderabad, Pune, Chennai, Jaipur, Indore and Ahmedabad have risen in prominence and economic importance, become centres of rising industries and destination for foreign investment .

CONT..Annual growth in GDP per capita has accelerated from just

1¼ per cent in the three decades after Independence to 7½ per cent currently.

It is a rate of growth that will double average income in a decade.

ADVANTAGES Overall the quality of service is improved

due to competition Avoid drawbacks of natural monopolies Freeing up government funds for other

social expenditures / investments Creation of new revenue streams for

governments through PPP in investments commonly undertaken with private sector.

increase entrepreneurship in country.

DISADVANTAGESa.Risk to create new types of private or other

state controlled monopolies or oligopolies.b. Short term impacts can be negative.- reduced effectiveness (quality) .- reduced efficiency (increased fares).- some competing companies may be drawn

out of the market due to very strong competition, as the market matures

c. Investment is a “Trojan Horse” (serves other purposes)

d. Liberalization can be excessive, both in its extend and in the absolute level of privatization selected.

e. Just before the transfer of investment or operation to state, its proper maintenance is “forgotten”.

PRIVATISATION Incidence or process of transferring the ownership of a

business, enterprise, agency from public sector to private

sector.

Eg. Functions like revenue collection, Prison management

The history of privatisation dates from Ancient Greece.

It improves the output and efficiency of the organisation

that are privatised.

TYPES OF PRIVATISATION

Share issue privatisation- selling shares on the stock market.

eg:London,Hongkong stock exchanges Asset sale privatisation-selling the whole firm or part of it to a

strategic investor usually by auction.

eg:Japan,Canada Voucher privatisation-shares of ownership are distributed to

all citizens.

eg:Russia.Poland

PROPONENTS of privatization

Performance Increased efficiencySpecializationGoalsCapitalAccountability

ADVANTAGES Basic advantage in privatisation is accurateness

and commitment towards the service. The private organizations are very much

concerned about the profits they make ultimately which depend on the quality of service being provided.

Privatisation generates more revenue compared to government enterprises.

Customer support and satisfaction basically is of much interest in private enterprises.

Disadvantages

1. The biggest threat is reliability. There is nothing that backs up the private organizations, where as govt can back up its enterprises easily in terms of funds.

2. Quality of service may be little compromised, its reliable. 

3. Some departments need social responsibility which can be done only by government like police department, traffic management.

How important is privatisation in India? Competition policiesEfficiency in utilising man and capitalNo conflicts of interest between a regulatory

function and a ownership function.No loss of credibilityTelecom and airline services in India are now

dramatically improved.

globalization Integration of national economies with the

international economies.

It is done through trade ,foreign direct investments, migration, capital flows and spread of technology.

It also refers of transnational dissemination of ideas, languages or popular culture.

CONT… Played a major role in export-led growth, leading to the enlargement of

the job market in India. From steel to Bollywood, from cars to IT, Indian companies are setting

themselves up as powerhouses of tomorrow’s global economy.Countries can produce what they are best at and trade it for other

countries.Countries which have a low savings level can borrow money from

overseas to invest, thus increasing their incomes and jobs.

EFFECTS INDUSTRIALFINANCIALPOLITICAL INFORMATIONALCOMPETITIONTECHNOLOGICALCULTURALSOCIAL

ADVANTAGESInternational companies are also expanding

their operations in India to service this massive growth opportunity.

Eg: Pepsi, Coca-Cola, McDonald’s, and Kentucky Fried Chicken.

Globalisation increases competition, making firms more efficient.

Promotes technological advancement, again creating jobs and growing incomes.

It puts downward pressure on inflation.

DISADVANTAGESPoorer countries suffering disadvantages.

Threat to local workers.

The shift to outsourcing.

Labor unions problems.

Increase exploitation of child labour.

Exploitation of natural resources.

CHANGES BEFORE AND AFTER LPG IN INDIAIn 1991, after India faced a balance of payments crisis, it

had to pledge 67 tons of gold to Union Bank of Switzerland and Bank of England as part of a bailout deal with the International Monetary Fund .

As a result of this requirement, the government of P. V. Narasimha Rao and his finance minister Manmohan Singh  started breakthrough reforms.

The main objective of the government was to achieve high economic growth and industrialize the nation for the well-being of Indian citizens.Today India is mainly characterized as a market economy

CONT…Since the economic liberalization of 1991, India's GDP

has been growing at a higher rate.It is increased from 5.5 (year 2000) to 10.6 in (year

2010).India is the largest producer in the world of milk, cashew

nuts, coconuts, tea, ginger, turmeric and black pepper.It is the second largest producer of wheat, rice, sugar,

groundnut and inland fish. It is the third largest producer of tobacco.

POSITION OF INDIA IN TERMS OF EXPORT & IMPORTIn 1950s, India's share in the world trade was 1.78%.Under import too India's dependence on food grains and

capital goods has declined. It is a remarkable achievement that India have

transformed itself from a predominantly primary goods exporting country into a non-primary goods exporting country.

THANK YOU