Liberalization , Privatization & Globalization

By

Ashwin Patel –

Mukesh Patel –

Samraiz Tejani –

Sheel Tikku –

Liberalization

• Liberalization is a very broad term that usually refers tofewer government regulations and restrictions in the economy in exchange for greater participation of private entities.

• Liberalization refers to the relaxation of the previous government restriction usually in area of social and economic policies.

• When government liberalized trade , it means it has removed the tariff ,subsidies and other restriction on the flow of goods and services between the countries.

Privatization

• Privatization means transfer of ownership and/or management of an enterprise from the public sector to the private sector. It also means the withdrawal of the state from an industry or sector partially or fully.

• Privatization is opening up of an industry that has been reserved for public sector to the private sector.

• Privatization means replacing government monopolies with the competitive pressures of the marketplace to encourage efficiency, quality and innovation in the delivery of goods and services.

Globalization

• Globalization implies integration of the economy of the country with the rest of the world economy and opening up of the economy for foreign direct investment by liberalizing the rules and regulations and by creating favorable socio-economic and political climate for global business.

So why do we need LPG?

• Excess of consumption and expenditure over revenue resulting in heavy govt. borrowings.

• Growing inefficiency on the use of resources.

• Over protection to industries.

• Mismanagement of the firm and the economy.

• Increase in losses for public sector enterprises.

• Various distortion like poor technological development, shortage of foreign exchange and borrowing from abroad.

• Low foreign exchange reserves.

• Inflation

So what are the advantages & disadvantages of implementing LPG?

Advantages of Liberalization

• Industrial licensing

• Increase the foreign investment.

• Increase the foreign exchange reserve.

• Increase in consumption and Control over price.

• Check on corruption.

• Reduction in dependence on external commercial borrowings

Disadvantages of Liberalization

• Increase in unemployment.

• Loss to domestic units.

• Increase dependence on foreign nations

• Unbalanced development

The Path of Liberalization

• Relief for foreign investors

• Devaluation of Indian rupees

• New industrial Policy

• New trade policy

• Removal of import Restrictions

• Liberalization of NRI remittances

• Freedom to import technology

• Encouraging foreign tie-ups

• Privatization of public sector

Advantages of Privatization

• Privatization helps to reduce the burden on Govt.

• It will help profit making public sector unit to modernize and diversify their business.

• It will help in making public sector unit more competitive.

• It will help to improving the quality of decision making, because the decisions are free from any political interference.

• Privatization may help in reviving sick units which are the liability of the public sector.

• It Encourage the new innovations without any restrictions.

• Industrial growth.

• Increase the foreign investment.

• Increase in efficiency

Disadvantages of Privatization

• Industrial sickness.

• Lack of welfare.

• Class struggle.

• Increase in inequality

• Opposition by employees.

• Problem of financing.

• Increase in unemployment.

• Ignores the weaker sections.

• Ignores the national importance

Different ways in privatization

• Liberalization Approach

• Relative Share Enlargement Approach

• Association of Private Sector Management Approach

• Transfer of Minority Equity Ownership Approach

• Transfer of Complete Ownership Approach

Advantages of Globalization

• Free flow of capital and increase in the total capital employed.

• Free flow of technology.

• Increase in industrialization.

• Spread of production facilities throughout the globe.

• Balanced development of world economies.

• Increase in production and consumption.

• Commodities at lower price with high quality.

• Increase in jobs and income.

• Higher Standard of living.

• Balanced human development

Disadvantages of Globalization

• Loss of domestic industries

• Exploits Human resource

• Decline in income

• Unemployment

• Transfer of natural resources

• Widening gap between rich and poor

• Dominance of foreign institutions

Features of Globalization

• Opening and planning to expand business throughout the world.

• Erasing the difference between domestic market and foreign market.

• Buying and selling goods and services from/to any countries in the world.

• Locating the production and other physical facilities on a consideration of the global business dynamics ,irrespective of national consideration.

• Basing product development and production planning on the global market consideration.

• Global sourcing of factor of production i.e. raw-material, components, machinery, technology, finance etc. are obtained from the best source anywhere in the world.

• Global orientation of organizational structure .and management culture

Conclusion

• Liberalization is loosening the control of government. In the world of business, it means that it is easier to get a building permit to build a house or factory.

•Privatization means that the government tries to do less in the world of business and allows citizens to own their own factories and businesses. A country that owns the oil wells and gas stations would decide to "get out of the oil business" and allow it to be run by private citizens. The government still collects money from taxes but no longer has to run the business.

•Globalization means that you cross borders. If you want to build a new car to sell in America, you might buy the steel from India; set up the factory in Mexico; open dealerships to sell the cars in America.