L LIBERALISATIO

N
P PRIVATISATION
G AND
GLOBALISATION
 Policies prior to 1991
reforms
L
P →
→
State interventions
Large business regulations
G →
→
License Raj
Closure of Indian economy to
the outside world
→ Import Substitution
 Impact of such
L policies
P → Stagnation of economic
growth
→ Huge public sector emerged
G → Poor infrastructure
investment
→ License owners built up
huge powerful empires
→ Major crisis of 1991
 New Industrial
L Policy of 1991
P
G LIBERALISATION
PRIVATISATION
GLOBALISATION
 LIBERALISATION
L • liberating industry from
P unnecessary controls and
restrictions
G • giving freedom to
entrepreneurs to take economic
decisions
 Key Features
L
P 1) Abolition of industrial licensing
except in some strategic industries e.g.
coal, drugs etc.

G 2) Reservation of industries for public

sector reduced.
3) Public sector policy → disinvestment,
closure of sick PSEs, greater autonomy.
4) Amendment of MPTP Act.
5) Foreign direct investments and
technology agreements.
L
P
G
 Benefits of
L Liberalisation
P 1) Huge employment
opportunities
G 2) More economic growth
3) Inflow of FDI
4) Wider choice to consumers
5) BOP deficit is reduced
 Shortcomings
L
P 1)Threat for small industries
2)Economy has become sensitive

G to ups and downs abroad

3)Growth in some important
sectors has slowed down
4)FDI has been not up to the
target
 PRIVATISATION
L
P • It is the process of transferring
ownership of a business or an
G enterprise from the public sector
to the private sector
• opening up of hitherto closed
areas to private sector
L  Disinvestment refers to the
transfer of a part of government’s

P shareholding. Thus privatisation

involves disinvestment of PSUs.
 Disinvestment can be done in
G following ways:
 Strategic sale
 Public Offer
 Equity auction
 For example :
L Till 2001, BALCO was a public sector
enterprise owned 100% by

P Government of India. In the year

2001, GOI divested 51% equity and

G management control in favour of

Sterlite Industries Limited.
L
P
G
 Benefits of
L Privatisation
P  Improvement in quality of
management
G  Reduction in budgetary deficit
 Recovery of Government fund
 PSUs can diversify and become
more competitive
 Shortcomings
L
 Private sector may ignore the
P needs of economy
 Monopoly power in the hands of
G big business houses
 Private enterprises may not be
interested in buying loss making
units
 Lop sided development
 GLOBALISATION
L Globalisation refers to the
P integration of national economies
into the international economy
G through trade, foreign direct
investment, capital
flows, migration and the spread
of technology.
L
P
G
L In context to India, this implies
• opening up the economy to foreign

P direct investment
• removing constraints and obstacles
to the entry of MNCs in India, allowing
G Indian companies to enter into foreign
collaborations
• carrying out massive import
liberalization programs
 It is due to globalisation that

L many MNCs have entered into

the Indian economy.

P E.g. Vodafone from Britain or L.G.

electronics from South Korea

G
 Due to globalisation all type of

L goods are available in India

today

P
G
 Benefits of
L Globalisation

P  Increased flow of foreign market

capital
G  Increased level of interdependence
and competitiveness
 Induce domestic firms to improve
technology
 New opportunities for growth
 Shortcomings
L  Ruin of traditional crafts and
P industries
 More beneficial for developed

G economies
 Takeover of national firms
 Brings instability
Threat of MNCs with immense
power ruling the globe.
 Conclusion
L The New Economic Policy of 1991 (LPG) has

P undoubtedly made significant contributions to

the Indian economy. The LPG model had not
only led to an increase in the GDP of the
G country but it has also benefitted the economy
as a whole. It was a catalyst in the
transformation of India from an
underdeveloped nation to a developing
country and would further help in the
economic development of the country.