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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)
3.Globalisation of the economy
Which are known as “ LPG ”. (liberalization privatization
Reasons for implementing LPG :
Excess of consumption and expenditure over revenue resulting in heavy govt.
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.
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
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
• Increase in unemployment.
• Loss to domestic units.
• Increase dependence on foreign nations
• Unbalanced development
Name of the enterprise
National Thermal Power Corporation
Indian Oil Corporation
Manager Telephone Nigam Limited
Steel authority India limited
Bharat petroleum corporation limited
Hindustan petroleum corporation limited
Bharat heavy electronics limited
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:
Relative Share Enlargement Approach
Association of Private Sector Management Approach
Transfer of Minority Equity Ownership Approach
Transfer of Complete Ownership Approach
Privatization helps to reduce the burden on Govt.
It will help profit making public sector unit to modernize and diversify
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.
Increase the foreign
Increase in efficiency
Lack of welfare.
Increase in inequality
Opposition by employees.
Problem of financing.
Problem in unemployment.
Ignores the weaker sections.
Ignores the national importance
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 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 socioeconomic 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.”
Opening and planning to expand business
throughout the world.
Erasing the difference between domestic and
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
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
Technological Advances in communication
Improvements in transportation and Technology
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
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