Unit 7: Liberalization, Privatization And Globalization

Unit – 7: Liberalization, Privatization & Globalization

LEARNING OBJECTIVES:

 Understand the concept and broader meaning of Liberalization, Privatization and Globalization.

 Appreciate the measures initiated by the Indian Government towards Liberalization

 Comprehend the concept, types, objectives, benefits, methods of Privatization

 Appreciate Disinvestment Commission and National Investment Fund

 Understand the concept and importance of Public Private Partnership

 Comprehend the features of globalization

 Appreciate the government measures towards Globalization

 Understand the impact and criticism of Liberalization, Privatization and Globalization.

STRUCTURE:

7.1 Introduction

7.2 Objectives

7.3 Need for Liberalization, Privatization,

To achieve higher economic growth rate. ii. To reduce inflation iii. To rebuild foreign exchange reserves.

7.4.1 MEASURES INITIATED BY INDIAN GOVERNMENT TOWARDS LIBERALIZATION:

Deregulation of Industrial Sector: In India, regulatory mechanisms were enforced in various ways. The following policies before liberalization were:

i. Industrial licensing under which every entrepreneur had to get permission from government officials to start a firm or to decide the amount of goods that could be produced. ii. Private sector was not allowed in many industries iii. Some goods could be produced only in small scale industries and iv. Control on price fixation and distribution of selected industrial products.

The reformpolicies introduced in and after 1991 removed many of these restrictions.Industrial licensing was abolished for almost all product categories except alcohol, cigarettes, hazardous chemicals industrial explosives, electronics, aerospace, drugs and pharmaceuticals. The industries reserved for the public sector are defence equipments, atomic energygeneration and railway transport. Many goods produced by small scale industries have now been de-reserved. In many industries, the market has been allowed to determine the

Since 1991, there has been continuous reduction in the taxes on individual income as it was felt that high rates of income tax were an important reason for tax evasion. It is now widely accepted that moderate rates of income tax encourage savings and voluntary disclosure of income. The rate of corporation tax, which was very high earlier, has been gradually reduced. Efforts have also been made to reform the indirect taxes, taxes levied on commodities, in order to facilitate the establishment of a common national market for goods and commodities. Another component of reforms in this area is simplification. In order to encourage better compliance on the part of tax payer, many producers have been simplified and rates have been substantially lowered.

Foreign Exchange Reforms: The first important reform in the external sector was made in the foreign exchange market. In 1991, as an immediate measure to resolve the balance of payment crisis, the rupee was devalued against foreign currencies. This led to an increase in the inflow of foreign exchange market from government control. Now, more often than not, markets determine exchange rates based on the demand and supply of foreign