A systematic approach towards LPG

1. LIBERALISATION
PRIVATISATION
GLOBALISATION
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2. Reasons for implementing LPG
 Excess of consumption and expenditure over
revenue resulting in heavy govt. borrowings.
 Growing inefficiency on the use of
resources.
 Over protection to industries.
 Mismanagement of the firm and the
economy.
 Increase in losses for public sector
enterprises.
 Various distortion like poor technological
development, shortage of foreign exchange
and borrowing from abroad.
 Low foreign exchange reserves.
 Inflation 2

3. Liberalization
Liberalization is a very broad term that usually
refers to fewer government regulations and
restrictions in the economy.
Liberalization refers to the relaxation of the
previous government restriction usually in area of
social and economic policies. When government
liberalized trade , it means it has removed the
tariff ,subsidies and other restriction on the flow of
goods and services between the countries.
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4. The Path of liberalization
 Relief for foreign investors
 Devaluation of Indian rupees
 New industrial Policy
 New trade policy
 Removal of import Restrictions
 Liberalization of NRI remittances
 Freedom to import technology
 Encouraging foreign tie-ups
 MRTP relaxation
 Privatization of public sector
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5. Advantages of liberalization
 Industrial licensing
 Increase the foreign investment.
 Increase the foreign exchange reserve.
 Increase in consumption and Control over
price.
 Check on corruption.
 Reduction in dependence on external
commercial borrowings
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6. Disadvantages of Liberalization
 Increase in unemployment.
 Loss to domestic units.
 Increase dependence on foreign
nations
 Unbalanced development
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7. Privatization
Privatization means transfer of ownership and/or
management of an enterprise from the public
sector to the private sector .It also means the
withdrawal of the state from an industry or sector
partially or fully.
Privatization is opening up of an industry that has
been reserved for public sector to the private
sector.
Privatization means replacing government
monopolies with the competitive pressures of the
marketplace to encourage efficiency, quality and
innovation in the delivery of goods and services.
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8. Need for Privatisation.
Though the PSUs have contributed heavily to
develop the industrial base of the country, they
continue, even today, to suffer from a number
of shortcomings which are identified below
very briefly :-
 A sizable number of PSUs have been incurring
and reporting losses on a continual basis.
Consequently, a large number of PSUs have
already been referred of loss giving units;
 Delay in implementation of projects leading to
cost escalation and other consequences;
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9.  Ineffective and widespread inefficiency on
management;
 With a view to provide opportunities for more
and more unemployed youths, more number
of people.
 A number of sick companies (40 companies)
which were in the private sector was taken
over by public sector mainly to protect the
employees. These sick units are causing a big
drain on the resources of the state; etc.
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10. Advantages of Privatization
• Privatization helps to reduce the burden on Govt.
• It will help profit making public sector unit to
modernize and diversify their business.
• It will help in making public sector unit more
competitive.
• It will help to improving the quality of decision
making, because the decisions are free from any
political interference.
• Privatization may help in reviving sick units which
are the liability of the public sector.
• Industrial growth.
• Increase the foreign investment.
• Increase in efficiency.
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11. Disadvantages of
Privatization Industrial sickness.
 Lack of welfare.
 Increase in inequality
 Opposition by employees.
 Problem of financing.
 Increase in unemployment.
 Ignores the weaker sections.
 Ignores the national importance
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12. Examples of privatization
in India
 Lagan Jute Machinery Company
Limited (LJMC)
 Videsh Sanchar Nigam Limited
(VSNL)
 Hindustan Zinc Limited (HZL)
 Hotel Corporation Limited of India
(HCL)
 Bharat Aluminum Company limited
(BALCO)
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13. Globalization
Globalization implies integration of the
economy of the country with the rest of the
world economy and opening up of the
economy for foreign direct investment by
liberalizing the rules and regulations and by
creating favorable socio-economic and
political climate for global business.
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14. According to IMF: -”The growing
economic interdependence of
countries worldwide through increasing
volume and variety of cross border
transaction in goods and services and
of international capital cash flows, and
through the more rapid and
widespread diffusion of technology.”
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15. Features of Globalization
 Opening and planning to expand business
throughout the world.
 Erasing the difference between domestic
market and foreign market.
 Buying and selling goods and services
from/to any countries in the world.
 Locating the production and other physical
facilities on a consideration of the global
business dynamics ,irrespective of national
consideration.
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16.  Basing product development and production
planning on the global market consideration.
 Global sourcing of factor of production i.e. raw-
material, components ,
machinery,technology,finance etc. are
obtained from the best source anywhere in the
world.
 Global orientation of organizational structure
.and management culture
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17. Foreign market entry strategies
 Exporting
 Licensing/Franchising
 Contract manufacturing
 Management contract
 Assembly operations
 Fully owned manufacturing facilities
 Joint venturing
 Merger and acquisition
 Strategic alliance
 Countertrade
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18. Pros and Cons of Globalisation
Globalization have several benefits ,these are: -
 Free flow of capital and increase in the total capital
employed.
 Free flow of technology.
 Increase in industrialization.
 Spread of production facilities throughout the globe.
 Balanced development of world economies.
 Increase in production and consumption.
 Commodities at lower price with high quality.
 Increase in jobs and income.
 Higher Standard of living.
 Balanced human development
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19. Negative effects of
Globalization
• Loss of domestic industries
• Exploits Human resource
• Decline in income
• Unemployment
• Transfer of natural resources
• Lead to commercial and political
colonism
• Widening gap between rich and poor
• Dominance of foreign institutions
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