Presentation about the change in economy since the introduction of LPG factors.

1. Liberalization
Privatization and
Globalization
BY
BATCH 09

2. INTRODUCTION
The economy of India had undergone significant policy shifts in the beginning of the
1990s.
In July 1991, India has taken a series of measures to structure the economy and improve
the Balance Of Payments position. This new economic policy introduced changes in
several areas.
The policy have salient feature which are: -
1.Liberlisation (internal and external)
2.Extending Privatization
3.Globalisation of the economy
Which are known as “LPG” (Liberlization Privatisation Globalisation)

3. REASONS FOR IMPLEMENTING LPG
Large and growing fiscal imbalances.(Gross fiscal deficit rose to 12.1% of GDP in
1991)
Growing inefficiency in the use of resources.
Low foreign exchange reserves.($1.2 billion in January 1991)
High inflation rate.(13.87% in year 1990-91)
Excess of consumption and expenditure over revenue resulting in heavy govt.
borrowings.
The low annual growth rate of Indian economy stagnated around 3.5% from 1950s to
1980s, while per capita income averaged 1.3%.
Increase in losses for public sector enterprises.

4. LIBERALIZATION
• 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.

5. 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
• Privatization of public sector

6. EFFECTS OF LIBERALIZATION
The fruits of liberalisation reached their peak in 2007, when India recorded its highest
GDP growth rate of 9%.
With this, India became the second fastest growing major economy in the world, next
only to China. The growth rate has slowed significantly in the first half of 2012.
An OECD report states that the average growth rate 7.5% will double in a decade, and
more reforms would speed up the pace.

7. 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.
• Competition promotes efficiency, so resources are wasted much less

8. DISADVANTAGES OF
LIBERALIZATION
• Increase in unemployment
• Loss to domestic units
• Increase dependence on foreign nations
• Unbalanced development

9. 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.

10. 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;
• Multiplicity of authorities to whom the PSUs are accountable;
• Delay in implementation of projects leading to cost escalation and other consequences

11. PUBLIC SECTOR

12. METHODS OF PRIVATISATION
FRANCHISING LEASING
CONTRACTING

13. DIFFERENT WAYS IN PRIVATIZATION
• Liberalization Approach
• Relative Share Enlargement Approach
• Association of Private Sector Management Approach
• Transfer of Minority Equity Ownership Approach
• Transfer of Complete Ownership Approach

14. ADVANTAGES OF PRIVATISATION
• 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.
•Increase the foreign investment.
• Increase in efficiency.

15. DISADVANTAGES OF PRIVATISATION
• Industrial sickness.
• Lack of welfare.
• Class struggle.
• Increase in inequality
• Opposition by employees.
• Problem of financing.
• Increase in unemployment.
• Ignores the weaker sections.
• Ignores the national importance

16. SUCCESSFUL PRIVATIZATIONS IN
INDIA
• Lagan jute machinery company limited (LJMC)
Gross turnover: pre-privatization= Rs. 6 million (april-june 2000),
post-privatization= Rs. 24 million (july-september 2000)
• Modern food industries limited (MFIL)
Share value went up from Rs. 2138 on 30th Dec.(prior to sale) to Rs. 3247 on
25th Feb.(post sale).
• Paradeep Phosphates Limited (PPL)
Net profit: pre sale= Rs. -57.95 Cr., post sale= Rs. 23.96 Cr.
• Bharat aluminium company limited (BALCO)
• Hotel Corporation of India limited (HCI)
• Hindustan Zinc limited (HZL)

17. 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 favourable socioeconomic and political climate for global
business.

18. 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.

19. FOREIGN DIRECT INVESTMENT
Foreign direct investment (FDI) is a direct investment into production or business in a country by
an individual or company in another country, either by buying a company in the target country
or by expanding operations of an existing business in that country.

20. FDI IN INDIA
FDI caps in various sectors:
• Defense 26%
• Insurance 49% (earlier 26%)
• Telecom 100% (earlier 74%)
• Single brand retailing 100%
• Multi brand retailing 51%
• Civil aviation 49%

21. ADVANTAGES OF GLOBALIZATION
• 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

22. DISADVANTAGES OF GLOBALISATION
• Loss of domestic industries
• Exploits Human resource
• Decline in income
• Unemployment
• Transfer of natural resources
• Widening gap between rich and poor
• Dominance of foreign institutions