Explain the following terms:
Liberalization refers to the removal of all the unnecessary controls and restrictions on the Government of a country. These controls include any form of license, permit, and quota. In 1991, India has introduced its new economic policy. It had liberalized the industrial sector in the following forms:
a. Industrial licensing was abolished. The license was required only for the six industries of cigarettes, liquor, defense equipment, dangerous chemicals, industrial explosive, and drug and Pharmaceuticals.
b. The trade restrictions of quantitative terms, customs, duties, and tariffs were removed on the movement of goods and services.
c. The companies had the liberty to decide the size and scale of production along with the price of its products.
d. The government encouraged foreign direct investment and steps with taken to attract FDI from other countries.
e. The government also reduced the tax rates on various goods.
f. The procedure for import and export was simplified.
b. Privatisation: Privatization refers to the transfer of ownership of state-owned enterprises from the public sector to the private sector. It implies a greater role to the private sector undertakings. Privatization was followed in the given manner:
a. The government sold a part of the equity of the public sector undertaking the and strategic sale of the public sector undertakings. This was called disinvestment.
b. Many companies were sold off such as Maruti Udyog Limited and modern Foods India.
c. The government has established the board of Industrial and financial reconstruction for the revival of the sick industries.
d. The government had given the award of Navratnas to the nine high-performing public sector undertaking. This help to bring about professionalism and to enable them to compete effectively in the market.
e. The number of industries that will be reserved only for the public sector reduced from 17 to 8. Only railway, atomic mineral, and atomic energy sectors were reserved for the public sector.
c. Globalization: Globalisation is the process of rapid integration and interdependence of the various economies of the world. The following policies were undertaken in regard to globalization:
a. The government has reduced and eliminated many duties and taxes on the import and export of goods for the promotion of free trade.
b. The government had also reduced many tariffs and customs duties.
c. Many steps were also taken to encourage foreign capital investment such as the introduction of Foreign Exchange Management Act and setting up of Special Economic Zones.