Meaning: Liberalization primarily means removal of controls and regulations at various levels of the economy facilitating market forces to determine its course and direction. It favours a competitive market solution to economic issues and a reduced role for the state in economic management.
Importance: Importance of liberalization is as follows :
(a) Liberalisation believes in ‘free market economy’. Therefore, it implies the gradual reduction of government control. This means the abolition of a licence-raj. It results in the removal of red-tape, procedural delay and bureaucratic regulation of economic activities.
(b) Liberalisation lays the foundations for multiplication of business, trade and commerce. In a free market economy, diversification of business, trade and organisation takes place.
(c) As there is expansion of business and as more and more capital is injected into the economy, the use of technology and automation becomes necessary. This helps in mechanization of work and computerization of administrative processes. Efficiency and economy are ensured.
(d) Under the process of liberalization, the consumer is benefited in many ways. There is a wider choice of goods and services. There is a great improvement in quality of goods and after-sales services.
(e) Liberalisation introduces a competitive market system. In every matter there is free competition. To the extent such competition is regulated by government, the competition is healthy. This ensures not only better standards of goods and services, but also reasonable prices.
(f) Finally, liberalization in the long-run brings about economic growth and progress of the nation. Of course, there must be adequate, planned and goal oriented governmental regulation.
Political implications:
The political implications of liberalization are as follows :
(a) In the name of liberalized policy citizens knock at the door of international opportunities with their knowledge and skill. The developing nations face lots of problems from such brain drain.
(b) As the process itself is capital intensive. it reduces dependency on labour and cuts opportunities for jobs.
(c) The incessant industrial activity at the global level generates lot of wastage leading to environmental degradation.
(d) The price of certain commodities like life saving drugs, fertilizers, etc. are automatically controlled by the world trade forums and associations.
(e) It affects the common man in his day to day life as he finds it difficult to earn his livelihood.
(f) Flexibility of monetary and fiscal policies of the government may lead to financial crisis like recession and depression.
