LPGPOLICYOFINDIA ANDITSEFFECTS

1 (BUSINESSENVIRONMENT) ,GAYAC onceptandmeaningofLiberalization, , , (NIP) ,manufacturing, ,PrivatisationandGlobalisationPolicyinIn dia:ForeignTechnologyAgreementsForeignIn vestmentMRTPAct,1969(Amended) , Toboostcompetitionbetweendomesticbusines ses Topromoteforeigntradeandregulateimportsa ndexports Improvementoftechnologyandforeigncapital Todevelopaglobalmarketofacountry Toreducethedebtburdenofacountry Tounlocktheeconomicpotentialofthecountry byencouragingtheprivatesectorandmultinat ionalcorporationstoinvestandexpand. Toencouragetheprivatesectortotakeanactiv epartinthedevelopmentprocess. Toreducetheroleofthepublicsectorinfuture industrialdevelopment. DeregulationoftheIndustrialSector FinancialSectorReforms TaxReforms ForeignExchangeReforms TradeandInvestmentPolicyReforms ExternalSectorReforms ForeignExchangeReforms : FinancialSectorReforms TaxReforms/FiscalReforms ForeignExchangeReforms/ExternalSectorRef orms IndustrialSectorReformsImpactsofLiberali sationinIndiaPositiveimpactsofliberalisa tioninIndia1) , )StockMarketPerformance:Generally,whenac ountryrelaxesitslaws,taxes, :Foreigndirectinvestmentallowedinthebank ingandinsurancesectorsresultedindeclineo fgovernment ) , )DiversificationforInvestors:Inaliberali sedeconomy, )ImpactonAgriculture:Intheareaofagricult ure,thecroppingpatternshasundergoneahuge modification, ) :Priorto1991 MNC , , ) ) , )ImpactofFDIinBankingsector.

2 Foreigndirectinvestmentallowedinthebanki ngandinsurancesectorsresultedindeclineof government (orgovernment) ,sinceplanning,suchaslowefficiencyandpro fitability,mountinglosses,excessivepolit icalinterference,lackofautonomy, ,raisingefficiencyofPSUsthroughincreased competition,increasingconsumersatisfacti onwithbetterqualitygoodsandservices, Privatisationaimsatprovidingastrongbaset otheinflowofFDI. (PSU s) TheefficiencyofPSU swasimprovedbygivingthemtheautonomytomak edecisions. :Governmentcompaniesaretransformedintopr ivatecompaniesin2ways,TransferofOwnershi p Governmentcompaniescanbeconvertedintopri vatecompaniesintwoways: Bywithdrawalofthegovernmentfromownership andmanagementofpublicsectorcompanies. Privatisationofthepublicsectorundertakin gsbysellingoffpartoftheequityofPSUstothe privatesectorisknownasdisinvestment. ,therearesixmethodsofPrivatisation: Thepublicsaleofshares Publicauction Publictender Directnegotiations TransferofcontrolofStateormunicipallycon trolledenterprises ,aprivatefirmisinterestedinmakingaprofit , ,companiessuchasBT, , , , :-Oftenprivatisationofstate-ownedmonopol iesoccursalongsidederegulation ,thereisnowmorecompetitionintelecomsandd istributionofgasandelectricity.

3 However,privatisationdoesn tnecessarilyincreasecompetition; , , ,inthiscase, :-Therearemanyindustrieswhichperformanim portantpublicservice, ,healthcare, ,theprofitmotiveshouldn ,inthecaseofhealthcare, ,inanindustrylikehealthcare,arguablywedo n , , :-Privatisationcreatesprivatemonopolies, ,thereisstillneedforgovernmentregulation , :-IntheUK, , :-Aswellasthegovernmentbeingmotivatedbys horttermpressures, ,theUKissufferingfromalackofinvestmentin newenergysources; ,ideas,technology,goodsandservices, , (InternationalMonetaryFund)as thegrowingeconomicinterdependenceofcount riesworldwidethroughincreasingvolumeandv arietyofcrossbordertransactionsingoodsan dservicesandofinternationalcapitalflowsa ndalsothroughthemorerapidandwidespreaddi ffusionoftechnology. LPGandtheEconomicReformPolicyofIndiaFoll owingitsfreedomonAugust15,1947, ,RajivGandhi,thethenPrimeMinisterofIndia , , , ,thethenPrimeMinisterofthecountry, , ,thethenPrimeMinisterofIndia, 'sRecommendationsTherecommendationsofthe NarasimhaRaoCommitteewereasfollows:Bring ingintheSecurityRegulations(Modified) , , (ForeignDirectInvestment) , , (comprisingportfolioinvestment,FDI,andin vestmentcollectedfromoverseasequitycapit almarkets)roseto$ )fromamicroscopicUS$ , )IncreaseinEmployment:Withtheopportunity ofSpecialEconomicZones(SEZ), (EPZ) )IncreaseinCompensation:AfterGlobalisati on, )HighStandardofLiving.

4 WiththeoutbreakofGlobalisation, , , ) ) ,growingfinancialfacilities,fastercommun ication,rapidtechnologychanges, ) ,improvesquality,reducesprocessingtime, )MultiplicityofManufacturingPlants-Inglo balisation,anMNCbyoperatinginmorethanone countrygainsresearchanddevelopmentproduc tion,marketingandfinancialadvantagesinit scostandreputation, urbandivideincountriessuchasChina, (knownasagflation)hasplacedmillionsofthe world nationaleconomiesaremoreconnectedandinte rdependent; :Irreversibledamagetoecosystems,landdegr adation,deforestation,lossofbio-diversit yandthefearsofapermanentshortageofwatera fflictmillionsoftheworld (dumpingissellingexcessoutputatapricebel owtheunitcostofsupply.) , (likestockmarket,sharemarket), , ,PharmaSector, :-Duetoglobalizationismultidimensions, , :-Globalizationbyremovinggeographical,po liticalandculturalborders,andalsobypassd ameoftimeandplacehaschangedattitudes,beh aviorandactionofindividuals,nations, ,globalizationhascreatedseveralevolution thescientificandacademicsocieties,especi allypoliticalscience,andsomeothermatters likepoliticalsystems,states,anddemocracy , ,relatingfromproduction,distributionandc ommunication, ,communicationandinteractiontoawholenewl evelandincreasedglobalization.