What Is Privatization?

1. Liberalization:

Liberalization is generally considered as a political ideology. As the term itself disclose, it is the process of removing barriers and restrictions in the economy for the private and foreign sector. In the case of India it was an innovative idea. Because till that time India followed a type of policy which tends to be somewhat a closed economy.

Liberalization refers to end of license, quota and many more restrictions and controls which were put on industries before 1991. Indian companies got liberalization in the following way:

(a) Abolition of license except in few.

(b) No restriction on expansion or contraction of business activities.

(c) Freedom in fixing prices.

(d) Liberalization in import and export.

(e) Easy and

Privatization simply refers to the process of reducing regulations in the economy for the private sector. By this the role of state or government began to decline. Privatization in India did by following two actions. That is disinvestment and denationalization. Denationalization is the process of selling of the entire ownership to the private sector. On the other hand disinvestment is the process of selling government or public owned securities or stocks to the private sector. Here disinvestment never requirestransferring the entire ownership. If the majority of the ownership (above 51%) transferred to private sector, they can claim the ownership and

The common influence and impact of such changes in business and industry are explained below:

1. Increasing Competition:

After the new policy, Indian companies had to face all round competition which means competition from the internal market and the competition from the MNCs. The companies which could adopt latest technology and which were having large number of resources could only survive and face the competition. Many companies could not face the competition and had to leave the market.

For example, Weston Company which was a leader in Т. V. market with more than 38% share in T.V. market lost its control over the market because of all round competition from MNCs. By 1995-96, the company almost became unknown in the T.V market.

2. More Demanding Customers:

Prior to new economic policy there were very few industries or production units. As a result there was shortage of product in every sector. Because of this shortage the market was producer-oriented, i.e., producers became key persons in the market. But after new economic policy many more businessmen joined the production line and various foreign companies also established their production units in