LIBERALISATION (2)

8/8/2019 LIBERALISATION (2)

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Liberalization of the economy means to freethe economy from direct or physicalcontrols imposed by the Government.

The various types of controls are as follows:-Industrial licensing system-Price control or financial control on

goods-Import license

-Foreign exchange control-Restrictions on investment by big

business houses


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Abolition of Industrial Licensing and

Registration.

Freedom for expansion and production to

Industries Freedom to import capital goods

Freedom to import technology

Free determination of Interest rate


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Improvements in Industries & service sector

Free flow of FDI & MNC.

Improvement in means of communication and

Transport.

DISADVANTAGES OF

LIBERALISAION

Danger in political independence.Underdeveloped countries fail to increase

their exports in comparison to imports


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Privatization of Industries means openingthe gates of Public Sector to Privatesector

The term privatization is used in twosense

Transferring the ownership of publicsector to private sector

Management and controlling of publicsector by private sector withouttransferring the ownership


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Disintegration of Socialist Economies

Inefficient public sector

Burden on the Government Inefficient management control


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To increase the efficiency and competitive

power.

To reduce deficit financing and public deficit

To strengthen industrial management To earn more and more foreign currency

To make optimum use of economic resources

To achieve rapid industrial development


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There are four important modes of

privatization. They are:

(a) Franchising, (b) Contracting, (c) Leasing,

and (d) Disinvestment.


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It is the dilution of stake of government to a

level where there is no change in the control to

dilution that results in the transfer of mgt.

Government ownership is diluted beyond 51%. In India, disinvestment of government share of

equity in PSUs is predominant. It started in 1992

immediately after the New Economic Policy.


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In india , there is not complete disinvestment ,

the government keep a dominant control.

Gov. could only disinvest 1% to 35% shares of

PSUs on an average. The shares of efficient and profit-making

companies are disinvested more than the

potentially sick or sick companies.

more in central PSUs than state PSUs


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Privatization covers three sets of measures

1. OWNERSHIP MEASURES

Total denationalization

Joint Venture Liquidation

Management buy-out

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2. ORGANISATIONAL MEASURES Leasing Restructuring( Financial, Basic )

3. OPERATIONAL MEASURESGrant of autonomy to PE s in decision making Provision of incentives to the employees Freedom to acquire certain inputs from the

market.


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Globalization is the process by which a firmsactivity become worldwide in scope

Doing or planning to expand , the businessglobally

Giving distinction between the domesticmarket & foreign market

Basing product development and productionplanning on the global consideration

Global sourcing of factors of productionGlobal orientation of organizational

structure and management culture


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1. NEW MARKETS

Growing global markets in services

New financial markets Global Consumer markets with global

brands

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2. GROUPS

The World Trade Organization

Regional Blocs

More policy Coordination groups-

G-77,G-7, OPEC, OECD

3. NEW RULES AND NORMS

Multilateral agreements in trade new

agendas on environment and socialconditions


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New multilateral agreements for services

property rights and communication.

4. NEW TOOLS OF COMMUNICATION Internet and electronic communication

Cellular phones

Fax machines

Faster and cheaper transportComputer aided design


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Human ResourcesWide BaseGrowing EntrepreneurshipGrowing Domestic MarketNiche marketsExpanding MarketsEconomic LiberalizationCompetition


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Government Policy and ProceduresHigh cost of basic inputs Poor Infrastructure

Resistance to change Poor Quality Image Supply problems Small Size Lack of Experience Limited R&D and marketing researchGrowing Competition Trade barriers


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1. Technological Advancement In

communication: This made it possible to

know in an instant what is happening in

different parts of the world.

The flow of information,by the Internet, can

enable developing countries to from each

other and from industrial countries.


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Improvements In Transportation And

Technology: this is reducing the costs ofshipping goods by water, ground and air.

This can facilitate the movements of goods.

Other Factors:Rising educational levels, technological

innovations, and the economic failures of mostcentrally planned economies.


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The important trends in Globalization are the following:

(a) International Trade:

1.Trade has grown twice as fast as global GDP

in the 1990s and the of developing countries

has risen from 23 to 29 percent.

2. There is a shift in trade, which has created a

new pattern in the international exchange of

goods, services, and ideas.


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3.Advances in information technology helps to

link firms from developing countries into

global production networks.

4. The tremendous growth of trade in services

and, more recently, of electronic commerce is

also a part of the new trade pattern.


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b) International Financial Flows:

1.There has been increase in international

capital flows of developing countries. However,

the financial crisis of 1977-99 have put it down.

2. flows are started to rise again. The financial

performance of emerging markets in the 1990smade capital account liberalization an

attractive option for developing countries.


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3.The East Asian meltdown has enhanced the

attractiveness of long-term capital investment.

4. Countries have started to recognize that

foreign direct investment brings with it not only

capital but also technology, market access and

organizational skills.


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C) International Migration:1.Along with goods, services, and investment,

people are crossing borders in large numbers.

2.According to World Development Report1999-2000, each tear between 2 million and 3

million people emigrate, with majority of them

going to just 4 countries: the United States,

Germany, Canada and Australia.3. The market for highly skilled workers will

increase

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LIBERALISATION (2)