Question

Distinguish between the following.

Liberalization and Privatisation.

Answer 1

S. No.	points		Liberalization	Privatisation
1.	Meaning		It refers to the process of eliminating unnecessary controls and restrictions for the smooth functioning of the business.	It refers to reduce the involvement of state or public sectors by involving of the private sector in economic activities.
2.	Aim		It aims to bring flexibility in business operations by creating an environment for growth and expansion.	It aims at promoting efficiency, increase productivity, profitability.
3.	Need		To reduce taxation, controls on foreign exchange, attracting foreign investment, etc. thereby competing with other companies at the international level.	To achieve quick and logical business decisions aimed at the commercial success of an organisation.
4.	Measures adopted		Reduction in tariffs, reformation of the financial system, abolishing the industrial licensing system, etc.	Reduction in a number of industries reserved for the public sector, disinvestment of shares, improvement in performance through MOU.
5.	Benefits to host company		It results in, high growth rate, easy availability of goods at competitive rates, good industrial relations, etc.	It results in profitability, production of superior quality products and services, self-motivation, etc.
6.	Benefits to consumers/traders		Optimum use of resources available at a global level, easy availability of goods at competitive rates.	The entry of the private sector results in competition thereby providing high-quality goods and services at lower prices.
7.	Positive effect		Removing the restriction on taxations, abolishing the industrial licensing system leads to the expansion and growth of new business opportunities.	Improved performance, high-quality goods, and services in the market. Timely prompt decisions with more efficiency.
8.	Adverse effect		It leads to social problems like urbanization and industrialisation, closure of domestic firms due to liberalized imported products, etc.	Growth of monopoly; inequality of income, lack of social responsibility, etc. will hamper the social order of the economy.
9.	Interrelationship		Liberalisation leads to privatisation and globalization.	Privatisation is a part of the process of globalization.