Liberalisation & Globalisation
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LiberalisationLiberalisation to a relaxation of previous government restrictions, usually in such areas of social, political and economic policy. This concept is referred to asderegulation.
Economic liberalisation in India
Theeconomic liberalisation in Indiarefers to the ongoingeconomic liberalisation, initiated in 1991, of the country's economic policies, with the goal of making the economy more market-oriented and expanding the role of private and foreign investment. Specific changes include a reduction in import tariffs, deregulation of markets, reduction of taxes, and greater foreign investment.
ImpactThe low annual growth rate of theeconomy of Indiabefore 1980, which stagnated around 3.5% from 1950s to 1980s, while per capita income averaged 1.3%.At the same time,Pakistangrew by 5%,Indonesiaby 9%,Thailandby 9%,South Koreaby 10% andTaiwanby 12%.Only four or five licences would be given for steel, electrical power and communications. Licence owners built up huge powerful empires.A huge private sector emerged. State-owned enterprises made large losses.
ImpactIncome Tax Department and Customs Department became efficient in checking tax evasion.Infrastructure investment was poor because of the public sector monopoly.Licence Raj established the "irresponsible, self-perpetuating bureaucracy that still exists throughout much of the country"and corruption flourished under this system.
All countries that have had sustained growth and prosperity have opened up their markets to trade and investment. By liberalising trade and capitalising on areas of comparative advantage, countries can benefit economically. Use of resources - land, labour, physical and human capital - should focus on what countries do best. Trade liberalisation measures should be taken on a multilateral basis and complemented by appropriate employment, labour and education policies, so that the benefits of trade can be shared.
BenefitsConsumers ultimately benefit because liberalised trade can help to lower prices and broaden the range of quality goods and services available.Companies can benefit because liberalised trade diversifies risks and channels resources to where returns are highest. When accompanied by appropriate domestic policies, trade openness also facilitates competition, investment and increases in productivity.
DownsideTrade reforms, even if beneficial for a country overall, may negatively affect some industries or some jobs and many commentators worry about negative effects on the environment. The solution to these problems is not to restrict trade. They should be tackled directly at source through labour, education and environmental policies.
Privatisation and GlobalisationPrivatisation refers to the participation of private entities in businesses and services and transfer of ownership from the public sector (or government) to the private sector as well.Globalisation stands for the consolidation of the various economies of the world.