Liberalisation: Liberalisation refers to the removal of unnecessary controls and restrictions of the government in the form of licences, permits and quotas. India initiated liberalisation of industries in 1991. Liberalisation of industries in India took the following form.
(i) Abolition of licenses: License required for the establishment of industries were abolished. The system of licensing was retained only for six industries namely, liquor, cigarette, defence equipment, dangerous chemicals, industrial explosives, and drugs and pharmaceuticals.
(ii) Augmentation of Production: Enterprises became free in deciding the scale and size of production and the price of the products. The MRTP companies (companies having assets worth more than Rs 100 crore) were free to expand the scale of their business according to the market conditions.
(iii) Removal of Trade Restrictions: Various restrictions regarding trade such as quantitative restrictions, customs, duties, tariff, etc. were removed to ease the movement of goods and services.
(iv) Encouragement to Foreign Direct Investment (FDI): Emphasis was laid to encourage competition in the market and to attract Foreign Direct Investment (FDI) from other countries.
Privatisation: Privatisation refers to the gradual transfer of ownership or management of state owned enterprises from the public sector to the private sector enterprises. It implies assigning a greater role to the private sector undertakings. In India, privatisation was followed in the following manner.
(i) Disinvestment: For disinvestment, the government adopted two methods. First, selling off a part of the equity of the PSU’s and second, strategic sale of PSU’s. Under privatisation, a large portion of the equity of the PSU’s was sold to the private sector. Also, strategic sale of a number of companies such as Modern Foods India, Bharat Alluminium Company (BALCO), Maruti Udyog Ltd., etc. was undertaken.
(ii) Establishing Board of Industrial and Financial Reconstruction: This board was established for the revival of the sick and loss making enterprises.
(iii) Reducing the Role of Public Sector: Under privatisation, the number of industries that were exclusively reserved for the public sector was reduced considerably from 17 to 8. At present, only 3 industries are exclusively reserved for the public sector namely, railways, atomic mineral and atomic energy.
(iv) Navratna Policy: To improve efficiency, infuse professionalism and to enable PSUs to compete effectively in the market, government awarded the status of ‘Navaratnas‘ to nine high performing PSUs.
Globalisation: Globalisation refers to the process of integration of various economies of the world. It is the process associated with increasing openness, growing economic independence and promoting economic integration in the world economy. In India, the following policies were followed with regard to globalisation.
(i) Removal on Trade Restriction: Various barriers on trade such as tariffs, custom duties, quotas, etc. were reduced considerably.
(ii) Reducing the Export Duty and Import Duty: Various duties and taxes on import and export were removed to promote free trade.
(iii) Encouragement to Foreign Capital Investment: With the aim of encouraging foreign capital investment various steps were taken such as increasing the equity limit of foreign capital, setting up of special economic zones, introduction of Foreign Exchange Management Act (FEMA).
