Liberalization, Privatization and Globalization in India. The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG or Liberalisation, Privatisation and Globalisation model.
The New Economic Policy -1991
Liberalisation
Privatisation
Globalisation
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3. Reasons for implementing LPG
Large and growing fiscal imbalances (Gross fiscal deficit rose to
12.1% of the GDP in 1991)
Growing inefficiency in resources
High inflation rate(13.87% in the year 1990-1991)
Low Foreign Exchange Reserve ($1.2 billion in January 1991)
The low annual growth rate of Indian economy stagnated around
3.5% from 1950s – 1980s)
Per capita income averaged 1.3%
5. The Path Of Liberalisation
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
6. Perks
Increase in employment
GDP Growth
Industrial licensing
Increase the foreign investment.
Increase the foreign exchange reserve.
Increase in consumption
Reduction in dependence on external commercial borrowings
Increment in competition
7. Downside
• Loss of domestic units
• Increase in dependence of foreign nation
• Increase in unemployment
8. Privatisation
Selling of government equity partially or wholly to private parties.
Disinvestment
Mergers
Acquisition
9. Advantages
Increase in efficiency
Reduction in Political Interference
Increased Competition
Reduction in economic burden
Increase in economic growth
Positive impact on financial health of public sectors
Better service to customers
10. Disadvantages
• Lack of social welfare
• Class struggle
• Increase in inequality
• Increase in unemployment
• Exploitation of weaker section
11. Globalisation
Free access to the market
Globally standardised products need to be marketed all over the world
Requires resources ( raw materials, finance , technology etc )
Free mobility of managerial personal and entrepreneurs.
Mergers , takeovers and structural regrouping
12. Blessings of globalisation
Rapid economic development
More Investment
More Employment
Increase efficiency of domestic companies
Consumer at advantage
Inventions and Discoveries
Growth of the agriculture