Liberalization Economic liberalization is a very broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participati on of private entities. The Government of India started the economic liberalization policy in 1991. Even though the power at the center has changed hands, the slackened till date. Before 1991, changes within the industrial sector in the country were modest to say the least. The sector accounted for just one- fifth of the total economic activity within the country. The sectoral structure of the industry has changed, albeit gradually. Most of the industrial sector was dominated by a select band offamily-based conglomerates that had been dominant historically. Post 1991, a major restructuring has taken place with the emergence of more technologically advanced segments among industrial companies. Nowadays, more small and medium scale enterprises contribute significantly to the economy. By the mid- 90s, the private capital had surpassed the public capital. The management system had shifted from the traditional family based system to a system of qualified and professional managers. One of the most significant effects of the liberalization era has been the emergence of a strong, affluent and buoyant middle class with significant purchasing powers and this has been the engine that has driven the economy since. Another major benefit of the liberalization era has been the shift in the pattern of exports from traditional items like clothes, tea and spices to automobiles, steel, IT etc. The made in India brand, which did not evoke any sort
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8/8/2019 Liberalization, Privatisation Global is at Ion
Economic liberalization is a very broad term that usually refers to fewer
government regulations and restrictions in the economy in exchange for greater
participation of private entities.
The Government of India started the economic liberalization policy in 1991.
Even though the power at the center has changed hands, the slackened till date.
Before 1991, changes within the industrial sector in the country were modest tosay the least. The sector accounted for just one- fifth of the total economic
activity within the country. The sectoral structure of the industry has changed,
albeit gradually. Most of the industrial sector was dominated by a select band of
family-based conglomerates that had been dominant historically. Post 1991, a
major restructuring has taken place with the emergence of more technologically
advanced segments among industrial companies. Nowadays, more small and
medium scale enterprises contribute significantly to the economy. By the mid-
90s, the private capital had surpassed the public capital. The management system
had shifted from the traditional family based system to a system of qualified andprofessional managers. One of the most significant effects of the liberalization era
has been the emergence of a strong, affluent and buoyant middle class with
significant purchasing powers and this has been the engine that has driven the
economy since. Another major benefit of the liberalization era has been the shift
in the pattern of exports from traditional items like clothes, tea and spices to
automobiles, steel, IT etc. The made in India brand, which did not evoke any sort
8/8/2019 Liberalization, Privatisation Global is at Ion
of loyalty has now become a brand name by itself and is now known all over the
world for its quality. Also, the reforms have transformed the education sector
with a huge talent pool of qualified professionals now available, waiting to
conquer the world with their domain knowledge.
Privatization
The public sector accounts for about 35 percent of industrial value added in India,
but although privatization has been a prominent component of economic reforms
in
many countries, India has been ambivalent on the subject until very recently.
Initially, the government
adopted a limited approach of selling a minority stake in public
sector enterprises while
retaining management control
with the governmen t, a policy
described as ³disinvestment´ to
distinguish it from privatization.
The principal motivation was to
mobilize revenue for the budget,
though there was someexpectation that private
shareholders would increase the
commercial orientation of public
sector enterprises.
This policy had very limited success. Disinvestment receipts were
consistently below budget expectations and the average realization in the first
five years was less than 0.25 percent of GDP compared with an average of 1.7
percent in seventeen countries reported in a recent study (see Davis et.al. 2000).There was clearly limited appetite for purchasing shares in public sector
companies in which government remained in contr0ol of management.
8/8/2019 Liberalization, Privatisation Global is at Ion
therefore globalization has been identified with the policy reforms of 1991 in
India.
Over the years there has been a steady liberalisation of the current account
transactions, more and more sectors opened up for foreign direct investmentsand portfolio investments facilitating entry of foreign investors in telecom, roads,
ports, airports, insurance and other major sectors
The Indian tariff rates reduced sharply over the decade from a weighted average
of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the
late nineties it touched 35.1% in 2001-02. India is committed to reduced tariff
rates.
The liberalization of the domestic economy and the increasing integration
of India with the global economy have helped step up GDP growth rates, which
picked up from 5.6% in 1990-91 to a peak level of 9.6 % in 2006- 07. A Global
comparison shows that India is now the fastest growing just after China.
This is major improvement given that India is growth rate in the 1970s was
very low at 3% and GDP growth in countries like Brazil, Indonesia, Korea, and
Mexico was more than twice that of India. Though Indias average annual growth
rate almost doubled in the eighties to 5.9% it was still lower than the growth ratein China, Korea and Indonesia. The pickup in GDP growth has helped improve
Indias global position. Consequently India position in the global economy has
improved from the 8th position in 1991 to 4th place in 2001 when GDP is