NEW ECONOMIC POLICIES: LIBERALIZATION, PRIVATIZATION, GLOBALIZATION

NEW ECONOMIC POLICY

In 1990s the govt. of India in order to come out of the economic crisis decided to devite
from its previous economic policies and learn towards Privatization . In July 1991 when
thedevaluation of Indian currency took place the govt. started announcing its new
economic polices one after another. Though these polices pertained to different aspects
of the economic field they had one thing in common. The economic element was to
orient the Indian system towards theworld market it is in this context the govt. launched
its new economic policy which consisted ofamong other things three important features.
Liberalization , Privatization and Globalization .Liberalization of the economy means to
free if from direct or physical control imposed by the govt.economic reforms were based
on the assumption that marten forces could guide the economy in amore effective
manner than govt.
Main objectives of New Economic Policy 1991
The main objectives behind the launching of the new economic policy (NEP) in 1991
bythe union finance minister Dr. Manmohansingh, could be stated as follows:

The main objective was to plunge Indian economy in to the arena of Globalization
and togive it a new thrust on market orientation.

The NEP intended to bring down the rate of inflation and to remove imbalances
inpayment.

It intended to move towards higher economic growth rate and to build sufficient
foreignexchange reserves.

It wanted to achieve economic stabilization and to convert the economic in to a

market economy by removing all kinds of unnecessary restrictions.

It wanted to permit the international flow of goods, services, capital, human

resources and technology, without many restrictions.

Beginning with mid-1991, the govt. has made some radical changes in its policies
bearingon trade, foreign investment exchange rate, industry, fiscal of fairs etcThe
various elements,when put together, constitute an economic policy which marks a big
departure from what has gonebefore.
New Economic Policies: Liberalization, Privatization and Globalization
The last quarter of the 20th century has been a wave of economic policy reforms in
thedeveloping world, with one country after another taking the Liberalization cure, often
imposed bythe international financial institutions. This wave of reform had been
preceded by a quarter-centuryof state directed effort at economic development, during
which time the goals of economic self reliance and import substitution industrialization
were the hallmarks of development strategiesin the less developed countries. These
goals seemed particularly justified, given the longexperience of these countries with
colonialism and the agricultural nature of their economies.However, all this seemed to be
overtaken by the subsequent surge of liberalization.

LIBERALIZATION
The term liberalization in this context implies economic liberalization. economic
liberalization constitutes one of the basic elements of the new Economic policy (NEP)
which theIndian Government launched in the middle of the year 1991. The other
important aspects of thepolicy are Privatization of the public sector, Globalization and
market friendly state.
The main trust of the New economic policy is liberalization. The essence of this policy
isthat greater freedom is to be given to the entrepreneur of any industry, trade or
business and thatgovernmental control on the same be reduced to the minimum.
The main purpose of the process to economic liberalization is to set business free and to
runon commercial lines. The underlying helief is that commerce and business are not
matter tocontained to fixed national boundaries; they are global phenomena. Here,
artificial govt.restrictions which hinder economic and commercial activities ad flow of
goods and services must be removed. The liberalization intends to liberalization
commerce and business and trade from the clutches of controls and obstacles.
The concept of Liberalization :
The recent wave of economic policy reform in the developing world has been seen as
anecessary consequence of a changed world economic system. The key feature of the
changed world economy is the clement of the heightened economic Globalization which
provides new external challenges as well as opportunities for development.
MAIN FEATURES OF THE POLICY OF LIBERA LISATION :
Following are main features of liberalization .

Lessened Government control and freelance to private Enterprises.

Capital Markets opened for private Entrepreneurs

Simplification of Licensing policy

Opportunity to purchase foreign exchange at market prices

Right To Take Independent Decisions Regarding The Market

Better opportunity for completion

Widened Liberty in the Realm of Business and Trade

Brief Evaluationof Liberalization :

From the Indian point of view, it is very difficult to say at this stage when the process
ofeconomic liberalization taken up by the govt. of India in 1990s has realiy brought big
economic gains to India gains to India. The process has no doubt brought some benefits
through suffers fromsome deficiencies.
The Gains

The liberalization process has helped the free movement of goods and services it has led
tobetter industrial performances. Industrial organizations have now become more
efficient andmarket responsive. Countrys exports are on the increase. Sectors such as
information technology and computer soft ware here registered tremendous progress.
The Deficiencies
Liberalization process has its deficiencies also. The economic reforms including
liberalization were introduced all on a sudden and proper background was not created to
take theirfull advantage and to face their consequences.
LIBERALIZATION IN INDIA
There are at least two striking features of main stream analysis of the economic reforms
programme in India since 1991. The first which is evident not only in official govt.
publications particularly English language financial press is the generally un-supported
far by and large havebeen successful so both in achieving the medium term goals of
structural adjustment and in preparing to economy for intake off in the new globalised
environment. The important charecteristics of the new policy may be described and
explained under thefollowing four heads liberalization; Privatization of the public sector,
Globalization and market friendly state. Liberalization is the thrust of the policy is the
freedom for the entrepreneur. The newpolicy permits foreign direct investment to a large
extent and in a larger number of Industries then before.
PRIVATIZATION
Privatization is a managerial approach that has attracted the interest of many categories
ofpeople academicians, politicians, government employee players of the private sector
and public onthe whole. Privatization has an adverse impact on the employee morale
and generates fear of dislocation or termination more likely it also adds on to the
apprehension pertaining to accountability and quality. Experts both advocate and
criticize Privatization making it more or lessprovocative decision that calls for diligent
scurrying by the decision makers in assessment of prossand cons attached to the
concerned policy.
In India Privatization has been accepted with a lot of resistance and has been dormant
initially during the inception period of economic Liberalization in the country. Thearticle
intends to analyze the present status of Privatization in India and summarize its
advantagesand disadvantages in context with the Indian economy. Privatization is also
one of the aspects ofthe new economic policy which came to take shape in the decade
1990. The term Privatization can notes wide range of ideas. But the broad meaning of
Privatization is that in the economic fieldmuch broader role is to be agencies and the role
of the public sector activities is to be limited.
Privatization refers to any process hat reduces the involvement of the state, public sector
ineconomic activities of a nation. The Privatization process in a mixed economy such as
of Indiaincludes:

Decentralization the transfer of the ownership of productive assets to the private

sector.

Entry of private sector industries into the areas exclusive reserved for the state
sector orwhich are considered exclusive monopolies of state.

Limiting the scope of the public sector or no more diversification of existing public
sector understandings.

DEFINITION OF PRIVATIZATION :

Steve H. Hanke refers to Privatization as the process where by the public

operetions aretransferred to the private sector.

Barbara Lee and John Nellis define the concept in this manner: Privatization is
thegeneral process of involving the private sector in the ownership or operation of
a stateowned enterprise. Thus the term refers to private purchase of all or part of a
company. It cover contractedly out and the Privatization of management through
management contractsleases or franchise arrangements.

MAIN OBJECTIVEOF PRIVATIZATION

1. The process of Privatization has been triggered with the main intention of
improving industrial efficiency and to facilitate the inflow of foreign investments.
2. It also wants to make the public sector undertakings strong able efficient
companies. It recommends a change in the role of the government from that of the
owner managerto that of a mere controller or regular.
3. It also intend to ensure efficient utilization of all types of resources including
human resources.
4. Privatization insists on the government to concentrate on the area such as
education administration and infrastructure and to give up the responsibility of
looking after business and running industries. It is expected to strengthen the
capital market by following appropriate trade policies.
PRIVATIZATION IN INDIA
In India the wave of Privatization that was generated during the Eighties (1980s) became
more powerful when Rajiv Gandhi assumed office as the Prime minister of India. The
issue of Privatization in India has to be understood in the context of the relative
inefficiency of the public sector industries, dearth of financial resources, defective
competition system, continuous labour problem and so on.
When India became independent it embarked upon planned economic development.In
order to accelerate the economic development it started giving more important to the
publicsector on which the Government had its control. The Industrial Policy Resolution of
1956 alsogave importance to the public sector industries. The growth of the public sector
assume importance in the Indian economy. It contributed to employment opportunities,
capital formation , development of infrastructure, increase in exports over the years, and
to many other areas. But itfailed in certain respects. It failed to generate adequate
surpluses to support sustained growth. The public sector was also a failure in obtaining
consistent profits, fulfilling labour demands and interests, encouraging industrial
researches, reducing the cost of the production, achieving technical expertise, and in
successfully facing the competition at the hand of the private sector. During the later
years of Mrs. Indira Gandhis regime a search for the new policy options began.
Gradually, a new industrial policy started taking its shape. The essence of this policy is

marketed forces must be allowed to play their role in shaping the economy. With the
announcement of new economic policy on 24th July 1991 by Dr. Manmohan Singh, the
then Union Finance Minister,India opted for a radical change.
ADVANTAGES OFPRIVATIZATION
Efficiency, Absences of political interference, Quality service, Systematic marketing Use
of freedom technology.
Accountability.
Innovation.
Research and development.
Infrastructure.
ARGUMENTS IN FAVOUR OF PRIVATIZATION

Privatization is Necessary to Revitalize the State Owned Enterprises

Privatization is Necessary to Face Global Competition

Privatization is Needed to Create More Employment Opportunities in Future

Helpful for Mobilizing and Investing Resources

Recognition of Talents and Good Performance of work

ARGUMENT AGAINSTPRIVATIZATION

Profitability Alone Should Not Become the Sole Yardstick to Measure Efficiency

Role of Public Sector Undertaking From the socio-Economic Angle Also Cannot
beignored

Protection of the Interests of the Weaker Section

Price fixing Policy Here is Not Profit- Oriented

Argument that the Private Sector Is More Efficient than the Public Sector is Not
Right

CONCLUSION
The experiment of Privatization undertaken in the European countries has been given a
lotof publicity in the media. The Privatization programmes implemented in Britain,
Mexico and thepreviously existed East Germany had attained good success. This success
has inspired manynations to go in that direction. India is also one among them.
Economist differ in their view regarding the relative success or failure of Privatization in
the Indian context. It is however, widelyheld that Privatization could achieve notable
success only if it is solidly backed by the political authority, effectively implemented by
the bureaucracy and implicitly acceptable. Privatization is complicated and its efficient
management is a competent task.

GLOBALIZATION
Globalization represent one of the aspects of the new economic policy lunched in
thedecades of 1980 and 1990s. The new economic policy has also maid the economy out
wardly oriented such that its activities are now to be governed both by domestic market
and the world market. The general usages of the terms Globalization can be follows ,

Interaction and interdependence among countries

Integration of world economy

Deterritorisation

The tem Globalization was first coined in 1980s . But even before this there were
interaction among nations. But in the modern days Globalization has launched all
spheres of lifesuch as economy, education, technology , cultural phenomenon , social
aspects etcthe termglobal village is also frequently used to high light the significance
of the Globalization . Globalization of production refers to the integration of economic
activities by units of private capital on awaked scale .S.K Misra and V.K Pury stated that
in simple terms Globalization means integrating economy of a country with the world
economy.
In simple words Globalization is refers to a process of increasing economic integration
and growing economic interdependence between countries in the world economy
The word Globalization is now used to sum contemporary world order. But the influence
of the Globalization of directly visible in the economic field and hence the term is very
often takento me economic Globalization of market. The Globalization defined as the
process whereby there are social, cultural, technological, exchange across the border.
STEPS INGLOBALIZATION

Need for corporate sector to go global : The Indian corporate sector has to take
lead and initiative in bringing about the Globalization of the economy. To go global
a corporate must consciously .

Needs to promote competitiveness of Indian producers : to succeed in global

market ,competitiveness of Indian producers has to be improved .

Need to adopt new strategies; the changes realities of the global environment
detect that the Indian firms must in order to survive.

Need to create favorable environment; world class companies need to undergo a

change.

Need to set up new institutions

Need for a rules and regulations : if we want make our companies world class
wealso need rule and regulations that are in leave with global corporate and
financial norms.

INDIAS AWAKNINGTO A GLOBALISED WORLD

The origin of globalizations in India need to be the analyses in terms of economic
changes brought about in the country in the last decades of 20th century. Thedefinite
move towards economic Globalization came in the summer of 1991 when the country
found itself in the midst of a series balance of payment crisis and was bailed out by the
IMF andthat world bank offered programs of stabilization and structural adjustment
which India was hardly in a position to refuse. TheLiberalization and Globalization of the
Indian economy are the keycomponents of the package of the reforms adopted and
implemented following the 1992 crises.
INDIAS PERSPECTIVESON GLOBALAISATION
The concept of Globalization to describe a verity of changing economical , political, and
cultural process . the development of Globalization is in India as which traditionally had
quite adeveloped pre industrial base trade and market , the market and trade relation
continue to belocated in local cultural even today . Also , the economic policies of India
up to the 1980 has beenthat of import substitution and protectionism . The political
Globalization in India ends up with the discussion on the survival and weakening of
nations state besides the nation state , another issue srelating to Globalization is that of
political ethnocentrism.
ADVANTAGES OF GLOBALAISATION

Better and faster industrialization: the flow of industrial units from developed
countries todeveloping countries gives speed of industries helping global
industrialization. Helps over all balanced development.

Flow of capital: moves from to surplus countries to the needy in globalization.

Investors get advantage of better returns for his capital.

Speed of production facilities throughout the world: the production units give cost
competitive and wider availability and manufactured gods.

Flow of technology : the advanced level of technology flow from developed country
to less developed countries .

Increase in conception: due to technology and the spared up gradation the

demand increases formanufactured good

Attitude: thinking globally in major plus point in globalization

Disadvantages of Globalization
o Globalization discourages domestic industry and business: with
sophistication in technologies and large scale production felicities of other
countries domestic trade and industries is hit.

o Problem on the labor front: the process of Globalization needs to job lay offs
and exploitation of human recourses. This is especially applicable to under
developed countries.
o Widening rich and poor divide: the un employment and decline of in income
level in lowerstrata of society widen the gap between the rich and poor more
and more.
o Transfer of national recourses: the developed countries tend to establish
factories in under developed countries may lead to commercial exploitation .
CONCLUSION
Today Globalization is being challenged around the world. In effects of
globalization, inIndia, to the path of developmental at a more rapid rate than
ever before. It is true that Globalization brings in its wake great enquiry,
mass impoverishment and misery. It is almostirreversibly widens the gap
between the developed and the developing nations. What we learnfrom this
process of Globalization is that it is more harmful for the developing and the
under developing countries. The choice for the devolving countries like India
lies not in total globalintegration, but less of global integration and more of
self relines and self sustenance with anemphasis on indigenous and
traditional production and knowledge system.