LIBERAlISATION PRIVATISATION GLOBALISATION

CONTENTS introduction Reasons for implementing LPG Liberalization Privatization Globalization

Introduction 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) 2.Extending Privatization 3.Globalisation of the economy Which are known as “LPG”. (libearlisation privatisation globalisation)

Reasons for implementing LPG Excess of consumption and expenditure over revenue resulting in heavy govt. borrowings. 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. Inflation

Liberalization 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.

The Path of liberalization Relief for foreign investors Devaluation of Indian rupees New industrial Policy New trade policy Removal of import Restrictions Liberalization of NRI remittances Freedom to import technology Encouraging foreign tie-ups MRTP relaxation Privatization of public sector

Advantages of liberalization Industrial licensing Increase the foreign investment. Increase the foreign exchange reserve. Increase in consumption and Control over price. Check on corruption. Reduction in dependence on external commercial borrowings

Disadvantages of Liberalization Increase in unemployment. Loss to domestic units. Increase dependence on foreign nations Unbalanced development

Examples Name of Enterprises Situation 1.National Thermal Power Corporation Profit 2.Indian Oil Corporation 3.Mananegar Telephone Nigam Limited 4.Steel Authority India Limited 5.Bharat Petroleum Corporation Limited 6.Hindusthan Petroleum Corporation Limited 7.Bharat Heavy Electronics Limited

Privatization 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 Liberalization Approach Relative Share Enlargement Approach Association of Private Sector Management Approach Transfer of Minority Equity Ownership Approach Transfer of Complete Ownership Approach

Advantages of Privatization Privatization helps to reduce the burden on Govt. It will help profit making public sector unit to modernize and diversify their business. 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. Privatization may help in reviving sick units which are the liability of the public sector. It Encourage the new innovations without any restrictions. Industrial growth. Increase the foreign investment. Increase in efficiency.

Disadvantages of Privatization Industrial sickness. Lack of welfare. Class struggle. Increase in inequality Opposition by employees. Problem of financing. Increase in unemployment. Ignores the weaker sections. Ignores the national importance

Examples of privatization in India Lagan Jute Machinery Company Limited (LJMC) Videsh Sanchar Nigam Limited (VSNL) Hindustan Zinc Limited (HZL) Hotel Corporation Limited of India (HCL) Bharat Aluminum Company limited (BALCO)

Globalization 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 socio-economic 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.”

Features of Globalization Opening and planning to expand business throughout the world. Erasing the difference between domestic market and foreign market. Buying and selling goods and services from/to any countries in the world. Locating the production and other physical facilities on a consideration of the global business dynamics ,irrespective of national consideration. Basing product development and production planning on the global market consideration. Global sourcing of factor 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 management culture

Foreign market entry strategies Exporting Licensing/Franchising Contract manufacturing Management contract Assembly operations Fully owned manufacturing facilities Joint venturing Merger and acquisition Strategic alliance Countertrade

Pros and Cons of Globalisation Globalization have several benefits ,these are: - Free flow of capital and increase in the total capital employed. Free flow of technology. Increase in industrialization. Spread of production facilities throughout the globe. Balanced development of world economies. Increase in production and consumption. Commodities at lower price with high quality. Increase in jobs and income. Higher Standard of living. Balanced human development

Negative effects of Globalization Loss of domestic industries Exploits Human resource Decline in income Unemployment Transfer of natural resources Lead to commercial and political colonism Widening gap between rich and poor Dominance of foreign institutions

References BOOKS: INTERNET: K.Aswathappa –”Essentials of Business Environment” Justin Paul –”Business Environment” F. Cheruniliam –”Business and Government” Shaikh saleem –”Business Environment” INTERNET: Wikipedia Businesschakra.com

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