Introduction to LPG Policy Prepared by Ms. Neetu Kushwaha Research Scholar Department of Commerce

1. India’s experience of
liberalization
and
globalization
Course Co-Ordinator
Ms. Neetu Kushwaha

2. INTRODUCTION
Since Independence the Indian economy has
undergone through several significant policy shifts.
The New Economic Policy1991, is one of the
remarkable shift for the growth of economy.This
new model of economic reforms is commonly
known as the LPG ( Liberalization, Privatization and
Globalization)

3. To pull the
country out of
economic crises
To accelerate the
economic
growth rate
Growing
inefficiency in
the use of
recourses
Reasons for implementing LPG

4. Liberalization
The basic aim of Liberalization was to put an end to those
restrictions which became hindrances in the development
and growth of the nation. Liberalization refers to eliminate
the control of state over economic activities. It provides
greater autonomy to the business enterprises in decision-
making and eliminates government interference. Thus,
when government liberalizes trade it means it has removed
the tariff, subsidies and other restrictions on the flow of
goods and service between countries.

5. Objectives of Liberalization Policy
•To increase competition amongst domestic industries.
•To encourage foreign trade with other countries
•Enhancement of foreign capital and technology.
•To expand global market frontiers of the country.
•To diminish the debt burden of the country.

6. INDIA’S EXPERIENCE
WITH LIBERALIZATION
1- De-reservation of Industries :
The number of industries reserve for the public sector has been reduced from
18 to 4 (2). Private Sector is allowed to start & operate units in all areas except
From areas of strategic importance.
2- Deregulation of Industries:
The new economic policy has abolished industrial licensing for all industries
except 6 (5) strategic industries. All the other industries are now permitted
to establish new units and expand without acquiring license. They are free to
Decide the scale & level of production.

7. 3- Financial Sector reforms:
There has been deregulation of banks and the capital market. Private
sector banks, insurance companies & mutual funds were permitted
4- Foreign Capital & Technology:
FDI norms have been liberalized. Now 100% foreign equity is
permitted in several Areas e.g. electricity generation, oil refining, ports,
harbors, telecommunications etc.
Continued…..

8. PRIVATIZATION
This is the second of the three policies of LPG. It refers
to the transfer of assets or service functions from public
to private ownership or control and the opening of the
closed areas to private sector entry. Privatization can be
achieved in many ways franchising, leasing,
contracting, etc. In other words, it is the reduction of
ownership of the management of a government-owned
enterprise.

9. Objectives of Privatization
•Improve the financial situation of the government.
•Reduce the workload of public sector enterprises.
•Raise funds from disinvestment.
•Provide better and improved goods and services to the
consumer.

10. GLOBALIZATION
• Globalization is the word used to describe the growing
interdependence of the world’s economies, cultures, and
populations, brought about by cross-border trade in goods
and services, technology, and flows of investment, people,
and information.
• It means to integrate the economy of one country with the
global economy.
• Globalization is attempting to create a borderless world,
wherein the need of one country can be driven from across
the globe and turning into one large economy.

11. India’s Experience with
Globalization
1- Rationalization of tariff structure:
The structure & pattern of custom duties levied on import of different commodities had become
very complex over the years. Since 1991 the peak tariff has been reduced substantially & the
tariff structure have been rationalized. Cheaper import of raw material will help to reduce the
cost of production & improve quality. Low cost & high quality products will enable Indian
exporters to compete with foreign goods & thereby encourage country’s exports.
2- Import Liberalization:
Quantitative restrictions such as import licenses & quotas have been phased out. Under the new
foreign trade policy most imports have been put under Open General List, wherein automatic
permission is granted to import goods. New import license is necessary for very few items.
Quantitative restrictions on a large number of exports items have been removed.

12. Continued…..
3- Reforms in foreign exchange management:
Before 1991, Government of India exercised strict control over foreign
exchange. Under the Foreign Exchange Regulation Act, (FERA) all Indian
exports has to surrender their foreign exchange earning to Reserve Bank
of India. They were given in return Indian rupee at a fixed exchange rate.
In 1999 Government abolished FERA & enacted Foreign Exchange
Management Act (FEMA) to promote foreign trade. Under the new
exchange management, the value of rupee is determined by market force
of demand & supply. Exporters are free to sell their foreign currency in
the open market & importers can freely buy it from the open market.
Thus, Indian rupee has been made freely convertible so as to boost the
country exports.

13. Thanking You!!