Concept /Advantages /Disadvantages of
Liberalization
Concept of Liberalisation :Progressive elimination of government control over economic activities is known as
liberalisation.
Liberalisation refers to freedom to business enterprises from excessive government
control and they are given freedom to make their own decisions regarding production,
consumption, pricing, marketing, borrowing, lending & investments.
The major elements of Liberalisation in India includes the followings :
1. De-licencing of industries :The Industrial Policy 1991 abolished (cancelled), licencing for most industries
which helped Indian companies to concentrate on productive activities.
The 6 industries that required licencing are alcohol, cigarattes, industrial explosives,
defence product, drugs & pharmaceuticals, hazardous chemicals, etc.
2. Liberalisation of foreign investment :The necessity to obtain approval for foreign investment from various government
authority often caused delayed. At present FDI is 100 % in certain sectors such as
infrastructure, exports, hotels, tourism, etc. The Liberalisation of FDI has resulted in
certain benefits such as increased in inflow of foreign capital, Development of skills
of Indian personnels due to foreign MNCs training transfer of technology by foreign
partners to Indian firms.
3. Liberalisation of foreign technology imports :The liberalized import of foreign technology led to technological improvement in
Indian industries. This helped in getting automatic permision for foreign technology
imports and no permision was required for hiring foreign technitians & foreign
technology testing.
4. Liberalisation of industrial location :The Industrial Policy 1991 stated that, there is no need to obtain approval from
central government for industrial location. This enabled the Indian firms to set up
industries at a right location of their choise without much interference from
government authority.
5. Liberal taxation :The government of India has introduced liberal reduction in taxation rates on direct
tax & indirect tax, customs, excise, service which has greatly benefited the firms
operating in India.
Advantages of Liberalisation :1. Increase in foreign investment.
2. Increase in efficiency of domestic firms.
3. Rise in the rate of economic growth.
4. Control of price.
Disadvantages of Liberalisation :1. Increase in unemployment.
2. Loss to domestic unit.
3. Increased dependence on foreign nation.
4. Unbalanced development of sectors.
Concept / Advantages / Disadvantages of
Privatisation
Concept of Privatisation :Privatisation is the transfer of control of ownership from public sector to private
sectors.
It means the conversion of property rights from the public to private owners.
The two elements of Privatisation are as follows :
1. Dereservation of public sectors :The dereservation of public sectors has enabled the entry of private sectors in those
industries which were reserve only for public sectors. This has led to improve
customers service & efficiency of the firms. At present, 3 industries has reserved for
public sector are Railways, Automic energy, & Specified minirals.
2. Dis-investment of Public sector :Dis-investment is a process of selling government equity in PSUs (Public Sector
Undertaking) to private parties. The disinvestment is undertaken to achieve good
customers service, overcome polotical interference, overcome curruption in PSUs,
improve efficiency of PSUs.
Advantages of Privatisation :1. Helps in reducing the burden on government.
2. Makes the PSUs competative.
3. Greater automomy for PSUs managers.
4. Industrial growth.
5. Better service to customers.
Disadvantages of Privatisation :1. Encourages the growth of monopoly power.
2. Privatisation may be prefer only for profit making PSUs.
3. Unbalance development of industries.
4. Compromise of social justice & public welfare.
5. Increased in corruption.
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Concept / Advantages / Disadvantages of
Globalisation
Concept of Globalisation :Globalisation is a process of rapid integration or inter-connection between countries
through trade, foreign direct investment, capital flow, migration, & the spread of
technology.
The main elements of Globalisation includes the followings :
1. Introduction of Foreign Exchange Management Act, 1999 (FEMA) :The government of India introduced FEMA 1999 to make foreign exchange
transactions easier such as obtaining of funds by Indian companies from abroad,
overseas investment by Indian firms, holding of properties in India by NRIs, holding
of properties by India nationals abroad.
2. Reduction in custom duties :The government of India reduced the custom duties. The reduction in import duties
has resulted in cheaper import into India.
3. Liberalisation of foreign investment :The government of India has liberalised foreign investment which in turns has
given a good boost to Indian capital market.
4. Signing of WTO Agreement :India has signed a number of agreement in order to expand Indian trade worldwide.
Some of the agreement includes TRIPS (Trade Related Intellectual Property Rights),
GATS (General Agreement on Trade in Service).
Advantages of Globalisation :1. Free flow of foreign capital.
2. Free flow of new technology & production method.
3. Increased in Industrialization.
4. Increased in employment & income.
5. Benefits for consumers.
Disadvantages of Globalisation :1. Loss of domestic industries.
2. Unemployment.
3. Increasing inequalities between rich & poor.
4. Cultural problems.
5. New type of political & commercial colonization.
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