The political environment in an economy is influenced by:
Philosophy of political parties
Ideology of the party in power
Nature of bureaucracy
The political stability
The foreign policy
In the early 1950s the Congress party adopted socialist pattern of society ,this was mainly responsible for the public sector dominated economy which lasted until the early 1990s.The dramatic changes in the political environment in the erstwhile USSR and East European countries that gave rise to drastic changes in their economic policies in the late 1980s.And these developments encouraged a revolutionary change in India’s economic policies in 1991.
Liberalization refers to a relaxation of previous government restrictions, usually in areas of social or economic policy. In some contexts this process or concept is often, but not always, referred to as deregulation .
Privatisation leads to change in management with change in ownership. Change in management is not a necessary condition in the process of Disinvestment. Disinvestment refers to dilution of the stake of the government to a level where there is no change in control that results in the transfer of management.
Globalisation describes a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. The term is sometimes used to refer specifically to economic globalization : the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration , and the spread of technology .However, globalisation is usually recognized as being driven by a combination of economic, technological, sociocultural and political factors.
MAJOR MEASURES AS PART OF THE LPG STRATEGY OF INDIA
DEVALUATION of Indian currency by 18-19% against major currencies in the international foreign exchange market. This measure was taken to resolve the BOP crisis.
Disinvestment: under the privatisation scheme,most of the public sector undertakings have been / are being sold to private sector.
Dismantling of the industrial licensing regime:at present only six industries are under compulsory licensing mainly on account of environmental safety.
During 1991-92 the first year of Rao ’s reforms program, the Indian economy grew by 0.9% only. However the GDP growth accelerated to 5.3 % in 1992-93, and 6.2% 1993- 94. A growth rate of above 8% was an achieved during the year 2003-04.
India’s GDP growth rate can be seen from the following graph since independence India to become 3rd largest Economy by PPP in the world by 2012 PriceWaterhouseCoopers
STATISTICS OF CHANGES Source: ECONOMIC SURVEY 2004-05 57.6 56.7 51.4 38.7 Services 21.9 21.6 22.1 26.1 Industry 20.5 21.7 26.5 35.2 Agriculture 2004-05 2003-04 2002-03 1984-85 % of GDP