Definitions [2]
Definition: Liberalisation
Liberalisation means removing unnecessary government restrictions and controls on business activities so that trade and industries can grow freely and compete globally.
Definition: Globalisation
Integration of national economies and societies through cross-country flows of information, ideas, technologies, goods, services, capital, finance, and people.
Key Points
Key Points: Liberalisation
- Liberalisation helps markets run freely with less government control.
- Boosts investment, competition, and technology use.
- Protects investor interests and makes trade easier.
- Liberalisation (from 1991) reduced government controls and licensing and opened more sectors to private competition.
- Industrial licensing removed for most industries; only a few areas reserved for public sector and small‑scale reservations reduced.
- Financial sector: private and foreign banks allowed; FIIs (foreign investors) permitted in markets; RBI became more of a facilitator.
- Tax reforms: income and corporate tax rates cut, procedures simplified; GST introduced to create one national market and reduce evasion.
- Foreign exchange: rupee devalued in 1991; exchange rate mostly determined by market demand and supply.
- Trade & investment: import licensing and quantitative restrictions removed, tariffs reduced, export duties scrapped to make Indian industry more competitive globally.
Key Points: Privatisation
- Privatisation = reducing state ownership/management in favour of private sector.
- Key reasons: inefficiency, losses, political interference, mismanagement in PSUs.
- Main measures: disinvestment, dereservation, full sale, MoU system, BIFR, NRB.
- Disinvestment beyond 51% transfers both ownership and management to private sector.
- PSUs are classified as Maharatna, Navratna, and Miniratna (I & II) based on autonomy levels.
- Real examples include Air India, Maruti, Hindustan Zinc, BALCO, and IPCL.
- Privatisation is one of the three components of the New Economic Policy (along with Liberalisation and Globalisation).
Key Points: Globalisation
- Globalisation = integration of the domestic economy with the world economy through free flow of goods, services, capital, information, and people.
- It differs from mere internationalisation - it involves deeper economic integration and global governance.
- India's key measures for globalisation include removal of quantitative restrictions, foreign capital inflows, rupee convertibility, trade policy reforms, and SEZs.
- Forms of globalisation include foreign trade reforms, export promotion, tariff reduction, repatriation, and open competition.
- Outsourcing is a key outcome - Indian firms like ONGC Videsh, Tata Steel, HCL, and Dr. Reddy's expanded globally.
- Positive impacts include foreign capital inflow, technology access, export growth, and greater consumer choice.
- Globalisation is closely linked to Liberalisation and Privatisation as part of the New Economic Policy framework.
Concepts [10]
- Economic Transition of India
- Main Objectives of the Economic Policy of 1991
- Features of the Economic Policy of 1991
- Public Bank Vs Private Banks Vs Foreign Banks
- Components of New Economic Policy
- Liberalisation
- Privatisation
- Globalisation
- Evaluation of the Economic Policy of 1991
- Corporate Social Responsibility
