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BY:VIBHA ; 9SHREYA; 43TO:DR. J.K CHANDELINTRODUCTIONJuly 1991,India has taken a series of measures to structure the economy and improve the BOP position. The new economic policy introduced changes in several areas. The policy have salient feature which are: - 1.Liberlisation (internal and external) 2.Extending Privatization 3.Globalisation of the economy Which are known as LPG . (liberalization privatization globalization)

Reasons for implementing 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

LIBERALIZATIONLiberalization 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

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.

Measures taken for liberalizationLiberalization for industrial licensing

Concession from monopolies act

Freedom for expansion and production to industries

Increase in the investment limit of the small industries

Freedom to import the capital goods and raw material

Freedom to import technology

Liberalization of export and import transactions

Liberalization in taxation policy

Liberalization in banking sector

ADVANTAGEIndustrial licensing

Increase the foreign investment.

Increase the foreign exchange reserve. Increase in consumption and Control over price. Reduction in dependence on external commercial borrowings

Competition promotes efficiency, so resources are wasted much less

Liberalization allows financial markets to provide loans to people who previously may not have been able to access loans that they can pay off, and it allows more financial instruments to be developed so people can choose the one that suits them

Liberalization removes government regulations on the economy, which promotes jobs, lower prices, higher incomes and lowers inflation.

Promotes technological advancement, again creating jobs and growing incomes

DISADVANTAGEIncrease in unemployment.

Loss to domestic units.

Increase dependence on foreign nations

Unbalanced development

Name of the enterprisesituationNational Thermal Power CorporationprofitIndian Oil CorporationprofitManager Telephone Nigam LimitedprofitSteel authority India limitedprofitBharat petroleum corporation limitedprofitHindustan petroleum corporation limitedprofitBharat heavy electronics limitedprofitPRIVATIZATIONPrivatization 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 .

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

METHODSFRANCHISING

LEASINGCONTRACTINGDISINVESTMENT

ADVANTAGEPrivatization 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. It Encourage the new innovations without any restrictions. Industrial growth.

Increase the foreign investment.

Increase in efficiency

DISADVANTAGE Lack of welfare.

Class struggle.

Increase in inequality

Opposition by employees.

Problem of financing.

Problem in unemployment.

Ignores the weaker sections.

Ignores the national importance

EXAMPLELagan jute machinery company limited(LJMC)Vides Sanchar Nigam limited (VSNL)Hindustan zinc limited (HZL)Hotel corporation limited of India (HCL)Bharat aluminum company limited(BACLO)

GLOBALIZATIONGlobalization 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.

According to IMF: -The growing economic interdependence of countries worldwide through increasing volume and variety of cross border transaction in goods and services and of international capital cash flows, and through the more rapid and widespread diffusion of technology.

FEATURESOpening and planning to expand business throughout the world.Erasing the difference between domestic and foreign marketBuying and selling goods and services from / to any countries in the world.Locating the production and other physical facilities on a considerations of the global business dynamics, irrespective of national considerations Global sourcing of factors of production i.e. raw material, components ,machinery, technology, finance etc. are obtained from the best source anywhere in the worldGlobal orientation of organizational structure and management culture

FACTORSTechnological Advances in communication

Improvements in transportation and Technology

other Factors:

ADVANTAGEIncrease in Trade in Goods and ServicesFree flow of technologyIncrease in industrializationIncrease in production and higher standard of living. Commodities at lower price with high quality Increase in jobs and incomesBalanced human development

DISADVANTAGELoss of domestic industriesExploits human resourcesDecline in incomeTransfer of natural resourcesWidening gap between rich and poorDominance of foreign institute