G D GOENKA PUBLIC SCHOOL, JAMMU

(Governed by Om Prakash Bansal Charitable Trust Regd.)

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SUBJECT: ECONOMICS
CH-3- "Liberalisation, Privatisation & Globalisation: An appraisal”

IMPORTANT TERMS /QUES.

Foreign Exchange Reserves Liberalisation Demonetisation
Globalisation Privatisation Stablisation measures in NEP
Fiscal policy Monetary Policy Structural reform measures in
NEP
Deregulation of industrial sector Foreign Institutional Investors (FII) FII (Foreign Institutional
Investors)
Financial sector reforms Disinvestment Outsourcing , BPO, KPO
Multilateral trade agreements WTO and GATT

NCERT
INTRODUCTION
Causes of financial/economic *Govt's expenditure exceeds its revenue by large margins
crisis (related to external debt) * Rise in prices of essential items
before 1991 * Imports grew at a very high rate without matching growth of
exports
* Decline in foreign exchange reserves to a level that was not
adequate to finance imports for more than two weeks.
How to finance govt. deficit? *Borrowings from Banks * Borrowings from people within the
country
* Borrowings from international financial institutions
Other name of World Bank International Bank for Reconstruction and Development (IBRD)
Loan amount provided by World $ 7 billion
Bank and IMF to India to
manage the crisis
Expectations of World bank and * To liberalise the economy by removing restrictions on private sector.
IMF from India * Reduction in the role of public sector
* To remove restrictions on trade with other countries
New set of policies can be 1. Stabilisation measures 2. Structural Reform measures
classified into 2 groups
Stabilisation Measures
Structural Reforms measures
LIBERALISATION
Liberalisation in the areas of 1980s
industrial licensing, export-
import policy, technology up
gradation, fiscal policy and
foreign investment was
introduced in ____.

Comprehensive reform policy 1991

introduced in _____
Deregulation of Industrial
sector removed many
restrictions like
Industries not covered under
delicensing policy of Govt.
Aim of Financial Sector
Reforms
Foreign investment limit in banks
was raised to ___
Tax reforms
GST Act 2016 implemented on
_______
Objectives of implementing
GST 2016
Foreign Exchange Reforms 1991
Quantitative restrictions on
foreign trade before 1991
Quantitative restrictions on
imports of manufactured
consumer goods and
agricultural products were
fully removed from
_________________
PRIVATISATION
2 ways of converting govt.
companies into private
companies
Some PSUs have been granted
special status (on the basis of
their profitability)
Maharatnas PSUs
Navratnas PSUs
Miniratnas PSUs
GLOBALISATION
Indian MNCs
WTO (World Trade
Organisation)
* Abolition of industrial licensing for almost all products.
* Defence equipment, Atomic energy and Railways are now
reserved for public sector
*Dereservation of many goods produced earlier by small
scale industries
*Price fixation by market forces in many industries
Alcohol, Cigarettes, Hazardous chemicals, Industrial explosives, Electronics,
Aerospace, Drugs and Pharmaceuticals.
To reduce the role of RBI from regulator to facilitator of financial sector.
(means financial sector is allowed to take decision on many matters without
consulting RBI.)
Around 50%
1. Continuous reduction in direct taxes to control tax evasion.
2. Reduction in corporation tax
3. Reforms in indirect taxes
4. To simplify taxation system in India
July 2017
*Generate additional revenue for govt., *Reduce tax evasion,
*Create 'one nation, one tax and one market'
Immediate measure to resolve the BoP crisis was Devaluation of rupee
* Tariffs * Import Quota
April 2001
i) Withdrawal of govt. from ownership and management of PSEs.
ii) Sale of Public sector companies
* Maharatnas * Navratnas * Miniratnas
Indian Oil Corporation Ltd. ; Steel Authority of India Limited
Hindustan Aeronautics Ltd. ; Mahanagar Telephone Nigam ltd.
Bharat Sanchar Nigam ltd. ; Airport Authority of India; Indian Railway
Catering and Tourism Corporation ltd.
i) ONGC Videsh= Subsidiary of Indian PSE. It has its projects in 16
countries
ii)Tata Steel= A pvt. company established in 1907.It is one of the top 10
global steel companies in the world which have operations in 26
countries and sell its products in 50 countries.
iii)HCL Technologies= One of the top 5 IT companies in India has offices
in 31 countries and employ 15000 persons.
iv)Dr. Reddy's Laboratories= Initially a small company, today has research
centres and manufacturing plants across the world.
Founded in 1995 (successor organisation of GATT)
Objective of WTO To regulate trade through removal of all trade barriers among members.
Growth of GDP after NEP 5.6 % during 1980-91 to 8.2% during 2007-12
(this increase is due to growth in service sector)
During reforms Growth of Agriculture sector declines
Growth of Industrial sector fluctuate
Growth of Tertiary sector has gone up.
During 2012-15 There has been a setback in the growth rates of different sectors
2013-14 Agriculture sector recorded a high growth rate.
It witnessed negative growth in the subsequent years
2014-15 Tertiary sector continued to witness high growth rate but the growth rate was
highest ever during 2014-15 i.e. 10.3%
2012-13 Steep decline in Industrial sector. After that it showed continuous positive
growth
FDI and FII Increased from US $ 100 million in 1990-91 to US $ 36 billion in 2016-17
Foreign Exchange Reserves Increased from US $ 6 billion in 1990-91 to US $ 321 billion in 2014-15
(India is one of the largest foreign ex. reserve holder in the world)

COUNTRIES Currency Value of 1unit of foreign currency in Indian Rupee

USA US $ Rs. 70.8
UK British Pound Rs.91.12
Japan Japanese Yen Rs. 0.65
China Chinese Yuan Rs.10.03
Korea Korean Won Rs. 0.06
Singapore Singapore Dollar Rs.52.03
Germany Euro Rs. 78.75

FILL IN THE BLANKS

1. ______ means utilisation of countries resources into different development activities in accordance with
national priorities. (Ans. Economic Planning)
2. _________refers to utilisation of country's resources in order to promote economic growth. (Ans. Self-reliance)
3. The excess portion of agriculture produce, which is sold into the market by the farmers, called __________
(Ans.- Marketed Surplus)
4. Two examples of socialist economies are ___________ & _____________. (Ans. Cuba , China, Vietnam)
5. Name some capitalist countries. (Ans. Hong Kong, Singapore, New Zealand, Australia, ....)
6. Privatisation could provide strong impetus to the inflow of ____________ . (Ans. - FDI)
7. Some PSUs have been granted special status as ___________, ______________ and _______________.
(Ans. Maharatnas, Navratnas and Miniratnas)
8. _______is one of the important outcomes of Globalisation. (Ans. - Outsourcing)

LONG ANSWER TYPE QUES -

NCERT
1. Give an example each of nationalised bank, private bank, foreign bank , FII and a mutual fund
2. Classify the following as direct and Indirect tax : Sales tax, Custom duties, property tax, death duties,
income tax, VAT.
3. Earlier countries used to keep silver and gold as reserves to make payments abroad? Find out in what form
do we keep our foreign exchange reserves now and how much foreign exchange reserves we have today?
(Ans. - Now countries keep reserves in the form of banknotes, deposits, treasury bills, other govt. securities,
SDRs etc. India's Foreign exchange reserves on 23rd Aug 2019 was US $ 429billion)
4. Some scholars refer to disinvestment as the wave of privatisation spreading all over the world to improve
the performance of public sector enterprises whereas others call it as outright sale of public property to the
vested interest. What is your viewpoint?
5. Do you think only loss making companies should be privatised? Why?
6. Losses incurred by PSEs are to be met out of the public budget. Do you agree with the statement?
7. Is globalization good or bad for developing nations like India?
8.India is benefiting from liberalisation and integration of world markets. Do you agree?
9. Is employment in call centres sustainable? What kinds of skill should people working in call centres acquire
to get a regular income?
10. Do you think the Navratna policy of govt. helps in improving the performance of public sector
undertakings in India? How?
11. distinguish between (i) Strategic & minority sale (ii) Bilateral and Multilateral trade
(iii) Tariff and non- tariff barriers
12. Agriculture sector is adversely affected by the reform process. Why?
(Ans.*Reduction in public investment. * Removal of fertiliser subsidy. * Reduction in import duties on
agricultural products. * Removal of MSP on many products)
13. Why has the industrial sector performed poorly in the reform period?
(Ans.- *Decrease in demand of industrial products due to cheap imports. *Lack of access to the markets
of developed countries because of non-tariff barriers etc.)
14. What are the major factors responsible for high growth rate of tertiary sector?
(Ans. - * Recent boom in outsourcing of IT services. * Decline in the cost of international communication
& transportation. * Rapid growth of trade in service businesses such as software and IT- enabled services.
* Easy availability of skilled manpower)
15. How is Siricilla (Andhra Pradesh) tragedy linked to power sector reforms?
(Under power sector reforms , subsidies ae replaced by huge tariffs. In power loom industries wages are
linked with production of cloth. production reduces due to power cuts and 50 power loom weavers
committed suicide in Siricilla.)

OTHER EXPECTED QUES.

1. Briefly explain the positive and negative effects of economic reforms on the Indian economy.
2. Economic policy of 1991 stressed on removing unnecessary restrictions and creating a more competitive
environment to increase its interaction with the world economy. Which value in your opinion have been
realised as per NEP?
(Ans.- Liberalisation = Greater autonomy to investment, enhancing competitive spirit, open-mindedness
Globalisation = To face the challenge of international discipline
Privatisation= Promotes efficiency of private sector)
3. Various fiscal reforms were initiated in the NEP of 1991. One fiscal measure was to reduce taxes. Is it
justifiable? Give your opinion.
(Hint - * Discourage tax evasion * Inculcate good values among tax payers to cooperate with govt. etc)