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Liberalizationprivatizationglobalization 091029131231 Phpapp02
Liberalizationprivatizationglobalization 091029131231 Phpapp02
Liberalizationprivatizationglobalization 091029131231 Phpapp02
Rajiv Gandhis government initiated the policy of liberalization since mid-80s. The liberalization initiatives have been underta en in !ndia "ith a vie" to increase a production# improve $uality and get access to mar et for products and service abroad. Radical liberalization or globalization measures have been brought in since %uly &''& to ma e the !ndian economy progressively mar et oriented and integrate it "ith the emerging global economy structure. These measures include reduction and rationalization of e(cise duty and customs duties# delicensing of several drug and pharmaceutical products# ready access to import of ra" material and capital goods and so on. !t has created an environment conducive to an enterprise# investment and innovation. !ndian industries have started to attract foreign portfolio investment and e$uity participation in ne" ventures. The government is committed to ma e foreign players feet at ease to invest directly and bring "ith it ne" technology and mar eting s ills. There has been impressive gro"th in )*! inflo"s to !ndia "ith the introduction of policy reforms. +s compared to a near total concentration in manufacturing till &''&# the bul of ne" inflo" has come in the energy and service sector.
LIBERALIZATION
The New Industrial Policy, !!
+ number of significant economic changes introduced by many a number of countries all the "orld over# the encouraging results of the liberalization measures introduced in &'80s by the Government of !ndia# and the precarious economic situation that prevailed during the later part 80s have encouraged and forced the then ,ongress government# "hich came bac to po"er at the center# under the leadership of -hri. .. /. 0arasimha Rao1a non - 0ehru family member# to ta e some bold measures to rejuvenate the economy and to accelerate the pace of development. !n this bac ground# the Government of !ndia announced its 0e" !ndustrial .olicy 20!. or !.3 on %uly 45# &''&. The important objectives are6 2a3 to correct the distortions that may have crept in# and consolidate the strengths built on the gains already made# 2b3 to maintain sustained gro"th in the productivity and gainful employment# and 2c3 to attain international competitiveness. Therefore# the basic philosophy of the 0e" !.# &''& has been the continuity "ith change. 7ecause# the ne" policy represents a rene"ed initiative to"ards consolidating the gains of national reconstruction at this crucial stage. 7ut "hat is more important is the change 2in continuity "ith change31change in the attitude of the state to"ards the industrial society# change from centrally planned economy to mar et led economy# change from e(cessive government intervention to minimal intervention# change from nationalization to privatization# change from subsidization and crosssubsidization to gradual "ithdra"al of subsidy# etc. 7ut these changes# "hich the government has introduced# represent a sharp departure from the earlier industrial policies. These changes pertain broadly to five areas viz.# 2a3 !ndustrial licensing# 2b3 .ublic sector policy# 2c3 8RT. +ct# &'9'# 2d3 )oreign investment# and 2e3 )oreign technology agreements.
Industrial Licensin"
This is one of the areas in "hich substantial change has been made by the government. :ith a vie" to give effect to these changes# the government issued a notification ;viz.# 0otification 0o. 5<< 2=3> on %uly 4?# &''& and this notification has e(empted the industrial underta ings from the operation of the follo"ing -ections of !ndustries *evelopment and Regulations +ct# &'?& subject to the fulfillment of certain conditions. 2a3 -ection &0 2"hich deals "ith registration of e(isting industrial underta ings3@ 2b3 -ection && 2"hich is concerned "ith the licensing for ne" industrial underta ings3@ and 2c3 -ection &A 2"hich is concerned "ith the licensing re$uirements for substantial e(pansion3. )urther# the second schedule appended to the notification cited above ;viz.# 0o. 5<< 2=3> lists the industries "hich are subject to mandatory industrial licensing. +ccording to this notification# only &8 industries "ere subject to compulsory industrial licensing. )urther# five more industries have been e(cluded from the list of industries "hich are subject to compulsory industrial licensing subse$uently. That means# only &A industries are no" subject to compulsory industrial licensing.
'orei"n In(est)ent
+s far as the direct foreign investment is concerned# the 0e" .olicy proposes to give automatic approval up to ?&E of e$uity in the case of high priority industries and it has also identified A5 such industry groups. )urther# the policy proposes to allo" majority foreign e$uity holdings up to ?&E of e$uity for the trading companies "hich are engaged in e(port activities. This is to enable the domestic companies an easy access to international mar ets. :ith a vie" to negotiate "ith the large international financial institutions and to approve the direct foreign investments proposals in selected areas# the 0e" .olicy proposes to constitute a special committee.
Conclusion
The 0e" !ndustrial .olicy# &''& certainly differs significantly from the earlier philosophies# approaches# etc. of the government. )or instance# prior to &''&# scope of public sector "as e(panded by reserving more number of industries for the public sector. 7ut no"# its scope has been reduced drastically by reducing the number of industries reserved for the public sector. Fi e this# a large number of changes can be noticed in the ne" policy. This process has been continuing even in post liberalization era. +dding to this# the government has ta en a number of steps to give effect to its policy decisions included in the 0e" !ndustrial .olicy# &''&. Though the economy has been benefited significantly from these measures# the economy has not been able to reap the full benefits of the =conomic Reform .ac age o"ing to the political instability# etc.
PRI*ATIZATION
Pri(ati+ation o, P$Us
8ajority of the industrial enterprises in the public sector have failed to achieve the desired result. Cf course# a number of factors-internal and e(ternal# controllable and non- controllable are responsible for his precarious performance. + loo at the history of public sector underta ings 2.-Ds3 in the country reveals the continuous e(pansion in the role of .-Ds. ,onse$uently# a number of enterprises have been established and huge amount of borro"ed capital has been employed by the state even in the non-core# nonstrategic and not so essential area. Bence# the state has made a number of changes in its 0e" !ndustrial .olicy announced on %uly 45# &''&.
Introduction
!n the si(ties and seventies# the public sector policy has been largely guided by !ndustrial .olicy Resolution# &'?9 "hich gave the public sector a strategic role in the economy. *uring the last four decades# massive investments have been made to build a public sector "hich has a commanding role in the economy. Today# many ey sector of the economy are dominated by the mature public sector enterprises that have successfully e(panded the production. !n the early post-!ndependence years# there "as virtual consensus about the need for the government intervention in economic activities. .andit %a"aharlal 0ehru described the public sector as Temples of 8odern !ndia. +t that time# virtually neither $uestioned the strategy nor raised any doubts about its implementation. The number of central public sector enterprises increased from ? in the year &'?& to 450 by the end of &''? and investments in public sector underta ings 2.-Ds3 increased from Rs4' crore in &'?& to Rs. &#<4#5A8 crore by the end of &''?. They contributed nearly one third of our e(ports. They made significant contribution to import substitution. Government underta ings account for more that <0E of the "or force employed in the organized sector. They have greatly reduced the imbalanced of regional development and have laid strong base for the rapid development of the country. -ome of the .-Ds have earned a reputation par e(cellence at the international level. -ome giant public sector units 2e.g.# !ndian Cil ,orporation# -teel +uthority of !ndia# Cil and 0atural Gas ,ommission# Bindustan .etroleum ,orporation Ftd.# ,oal !ndia Ftd and 7harat .etroleum ,orporation Ftd3 figure in )ortune !nternationals large companies. )urther# the public sector accounts for one-fourth of the countrys G*.. There are t"o million employees in government underta ings and the average emoluments per annum amount to more than Rs.?0# 000 each. 7esides paying higher salaries# public enterprises assure job security# good "or ing condition# attractive incentive scheme# participative management# higher degree of safety# ade$uate facilities# etc.
%eanin" o, Pri(atisation
The revolution of privatization started in &'80 and spread to many parts of the "orld. -everal countries are privatizing their public sector enterprises. !ndia is no e(ception to it. .rivatization "as meant to improve the performance of public enterprises. .rivatization techni$ues have been tried in countries li e Great 7ritain# ,hina# D-# Tur ey# 7razil# 8e(ico# %apan# etc. .rivatization# in the narro" sense# means transfer of o"nership# or sale of public enterprises. Bo"ever# privatization has been used in different "ays as detailed belo"6 &. Li#erali+ation A--roach6 .rivatization may be used in the sense of liberalization having fe"er controls and regulation by the state in economic activities. This also means slo"ing of ne" controls and regulations and also dismantling of the e(isting controls and regulations. 4. Relati(e $hare Enlar"e)ent A--roach6 .rivatization may relate to enlargement of the share of private enterprises in the production of goods and services in the economy. This means that faster economic e(pansion of goods and services produced by private sector and slo"ing do"n of production of goods and services in the public sector. A. Association o, Pri(ate $ector %ana"e)ent A--roach6 This approach suggests utilizing the services of managerial personnel or e(ecutives of private sector enterprises for the conduct and management of .-Ds. 5. Trans,er o, %inority E.uity Ownershi- A--roach6 .rivatization may be defined as the transfer of minority e$uity o"nership of public enterprises to private individuals and institutions so that the ultimate control continues to remain "ith the state. ?. Trans,er o, Co)-lete Ownershi- A--roach6 .rivatization is also used in the sense of sale of all the shares to the private parties so that the public enterprises are converted into private enterprises. !n !ndia# privatization is ta ing place by adopting t"o common methods viz.# 2a3 Baving fe"er controls and regulations by the state in economic activities# and 2b3 Transferring o"nership of state e$uity in .-Ds to private individuals and institutions.
Bene,its o, Pri(ati+ation
!t is e(pected that privatization "ill ensure the follo"ing benefits6 &. !ncreasing overall efficiency6 4. !mprovement in the $uality of management and decision ma ing6 A. 0o government financial bac ing# and therefore# capital mar et "ill compel these enterprises to be more efficient@ 5. -ubstantial reduction in governments budgetary support resulting in reduction in budgetary deficit@ ?. Recovery of government fund "hich could more productively be used in development activities@ 9. Reduction in political and bureaucratic interferences@ 7etter industrial relations management@ etc.
$hortco)in"s
Though the .-Ds have contributed heavily to develop the industrial base of the country# they continue# even today# to suffer from a number of shortcomings "hich are identified belo" very briefly. &. + sizable number of .-Ds have been incurring and reporting losses on a continual basis. ,onse$uently# a large number of .-Ds have already been referred of 7!)R@ 4. 8ultiplicity of authorities to "hom the .-Ds are accountable@ A. *elay in implementation of projects leading to cost escalation and other conse$uences@ 5. !neffective and "idespread inefficiency on management@ ?. 8any .-Ds are operating "ithout the leader 2i.e.# chief e(ecutive or chairman3@ 9. :ith a vie" to provide opportunities for more and more unemployed youths# more number of people# than re$uired# "ere recruited and therefore# many .-Ds are over-staffed resulting in lo"er labour productivity# bad industrial relations# etc.@ <. un-remunerative pricing policy@ and 8. + number of sic companies 250 companies3 "hich "ere in the private sector "as ta en over by public sector mainly to protect the employees. These sic units are causing a big drain on the resources of the state@ etc.
%ethods o, Pri(ati+ation
There are four important modes of privatization. They are6 2a3 )ranchising# 2b3 ,ontracting# 2c3 Feasing# and 2d3 *isinvestment. !n !ndia# disinvestment of government share of e$uity in .-Ds is predominant. !t started in &''4 immediately after the 0e" =conomic .olicy in a phased manner. The main criticism of disinvestment of shares of .-Ds in !ndia is that it has been partial and half-hearted. There seems to be no plans to disinvest completely. The government still "ould li e to eep a dominant control. A' companies have been proposed for disinvestment till &''?-'9. +ll the companies proposed for disinvestment are central .-Ds. 0o state level .-D has been proposed for disinvestment. !t could only disinvest &E to A?E shares of .-Ds on an average. !t is also observed that the shares of efficient and profit-ma ing companies are disinvested more than the companies "hich are potentially sic or sic companies. The disinvestment percentage is also not much in lossma ing and inefficient units# thereby defeating the purpose. The )inance 8inistry has also e(plained that the government is consciously not offloading larger chun s of its holding. The Rangarajan ,ommittee has suggested that government holding in public sector underta ing must be less than ?0E. 7ut partial disinvestment "ill be of no avail to change the culture in the public sector underta ing.
Conclusion
The privatization process launched "ith all seriousness after the announcement of 0e" !ndustrial .olicy# &''& "as a failure. The state must accept this and ta e necessary steps either to privatize or to improve the efficiency and performance of .-Ds.
/LOBALI$ATION
Introduction0
The e(pansion of economic activities across political boundaries of nation states. 8ore important# perhaps# it refers to a process of increasing economic integrated and gro"ing economic interdependence bet"een countries in the "orld economy. !t is associated not only "ith an increasing cross- border movement of goods# services# capital technology information and people but also "ith an organization of economic activities "hich straddles national boundaries. This process is driven by the lure of profit and threat of competition in the mar et. The term Globalization as such denotes adjustment of national economy "ith that of the "orld economy. !t is conversion of a national mar et into international mobility of factors of production. !n others "ords# it may be described as the integration of national economy "ith that of global economy. +n important attribute of Globalization is the increasing degree of openness# "hich has three dimensions# i.e.@ international trade# international investment and international finance. +ccording to :orld *evelopment Report# Globalization reflects the progressive integration of "orlds economies. The manifestation of production includes spatial reorganization of production the interpenetration of industries across borders# the spread of financial mar ets# and the diffusion of identical consumer goods to distant countries and massive transfer of population across national frontiers. Globalization is a process of reaffirmation of faith in the mar ets# retaining the character of independence of a country. Bere# the country follo"s a pragmatic policy "ith a shift in decision ma ing from government to business. The mar et forces and the la"s of economics "ill have greater importance than the political ideology. To ma e a country a successful partner in Globalization# the government must play a complimentary role.
Trends in /lo#ali+ation0
The important trends in Globalization are the follo"ing6 1a2 International Trade6 Trade in goods and services has gro"n t"ice as fast as global G*. in the &''0s and the share attributable to developing countries has risen from 4A to 4' percent. There is a compositional shift in trade# "hich has created a ne" pattern in the international e(change of goods# services# and ideas. Trade in components is one part of that ne" pattern. +dvances in information technology helps to lin firms from developing countries into global production net"or s. The tremendous gro"th of trade in services and# more recently# of electronic commerce is also a part of the ne" trade pattern.
Ad(anta"es o, /lo#ali+ation0
Disad(anta"es o, /lo#ali+ation0
The universal acceptance of the mar et economy and the Globalization led by private enterprises tend to have some harmful effects on the economy of developing countries. They are discussed belo"6
CONCLU$ION0
=conomic liberalization has increased the responsibility and role of the private sector. +t the same time# it has reduced the control of the government on economy affairs. !t is e(pected that the reforms "ould liberalize the !ndian economy enough to create a conducive environment for rapid economic development. The 0inth )ive Iear .lan# therefore# rightly observed# GThe conditions that e(ist today# demand a decisive brea from the past. The government has ta en on itself too many responsibilities "ith the result that it not only encouraged a dependency syndrome among our people# but also imposed severe strains on financial and administrative capabilities of the government. .rivate initiative "hether individual# collective or community-based forms the essence of the development strategy articulated in the plan. The process of reforms according to many economists and social scientists is not fast enough to achieve the goals. %effrey -achs# director of Barvard Dniversitys center for international development and a noted economist# pointed out that the reform process in !ndia had a long "ay to go. Be feels that "ithout a focus on the Gt"in pillarsH of social and economic strategies# the future "ould be blea for !ndia# especially in the conte(t of competition all around. Fiberalization process is on the slo" trac . Government is e(pected to reduce and finally give up its involvement in economic matters and play a major role in providing the re$uired socio-economic infrastructure. The government# ho"ever# is reluctant to give up its role of o"ning and controlling economic activities. +t the same time its inability to spend for providing minimum health and education services. !t is eager to spend on higher education "ithout spending enough on primary and secondary education. !t has failed in providing a corruption free administration# an essential precondition for increasing competitiveness. -uccess of the economic reforms depends upon the commitment of all concerned J people# political parties# bureaucracy# and government J to the socio economic progress of the country.