Ch-16-Economic Liberalization and Globalization: Privatization

Weightage Marks [ 4 ]
Objective 1
Short Answer [60 words] 3
CH-16- ECONOMIC LIBERALIZATION AND GLOBALIZATION

In industrial policy of 1991, economic reforms were implemented which could strengthen
economic development, which are known as (1) Liberalization (2) Privatization and (3)
Globalization.
(1) Economic Liberalization:

Government gradually reduces the restrictions and controls imposed on private sector and
encourages economic development. This is known as economic liberalization.
Main economic reforms related to liberalization
 Earlier private sector was allowed to commence business only in 18 industries but after July
1991 the restriction was eliminated.
 Areas other than railways, atomic energy and defense were opened for private sector.
 Tradition of compulsory registration for industries was cancelled.
 Provision to take government permission for setting up industries which do not cause
pollution was cancelled.
Advantages of Liberlization :
 As a result of liberlization, private sector developed which led to increase in production.
 Global trade started getting encouragement and there has been increase in foreign trade.
 Because of the increase in foreign trade there has been increase in reserve of foreign
exchange.
 Internal infrastructural facilities also improved due to liberlization.
Disadvantages of Liberlization
 Inspite of decrease in restrictions, monopoly could not be checked.
 As focus has only been paid on industrial sector, India has remained backward in agriculture
 There has been increase in disparity of income.
 Because of increase in imports and decrease in exports, foreign debt has increased.
(2) Privatization :
Privatization means the process in which ownership and management of industrial units,
under state control is handed over or transferred to the private sector.
Main economic reforms related to privatization
 Those areas which are reserved for public sector, are opened for the private sector.
 State keeps the ownership of state owned companies under its control and gives the charge
of management to the private companies or state keeps management in its own hand and
gives ownership to the private company.
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Advantages of Privatization :
 There is increase in number of production units in industrial sector.
 Production has been increased in capital intensive and consumable commodities.
 Working capacity of public sector has improved due to privatization of public sector.
Disadvantages of Privatization :
 Economic power has centralized as a result of privatization. Because of which evil of
monopoly has increased.
 Cottage industries have not developed properly only large industries have been benefitted.
 Prices have not remained under control due to privatization this has led to problem of
price rise.
(3) Globalization:
Globalization is the process of connecting one country economy with the world economy.
Following improvements have taken place due to globalization :
€ Obstacles of trade between two nations have been removed.
€ Capital exchange can easily take place between two nations.
€ Obstacles in the way of exchange of technology have been removed.
€ Free exchange of labour may be there among different nations of the world.
Advantages :
€ Foreign Direct Investment (FDI) is encouraged due to globalization.
€ Goods produced in the developed countries can easily be obtained due to Globalization.
€ Developing countries like India can withstand competition at international level due to
Globalization.
Disadvantages :
€ Expected success has not been attained in finding solution to the problems of poverty and
unemployment due to globalization.
€ Developing countries have not acquired proper benefits of increase in exports,
€ Large scale industries have acquired more benefit than small scale industries.
€
World Trade Organisation (WTO)
world Trade Organization was established on 1st January', 1995 by the member Nations of
United Nations. Its headquarter is located in Geneva in Switzerland.
Objectives :
(1) To remove obstacles influencing global trading.
(2) To remove protection policy given to industries of country' for foreign trade.
(3) To co-ordinate with global trade policy and economic policy.
(4) To solve the trade related disputes arising in the world.
Functions :
(1) To set up a required structure for implementation of agreement related to multinational trade
(2) World trade organization plays a vital role for debate and negotiations for multinational trade.
(3) WTO encourages unbiased international trade.
(4) Different nations follow their own national policy. It observes them and suggests required
improvements.
Impacts on Indian Economy
India is a member of this WTO organization since its inception.
₪ Before 1995 India’s contribution to world trade was 0.5 %. After 1995 India’s contribution in
world trade has increased to 1 %.
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₪ Being member of WTO, export of readymade clothes of our country has increased.
₪ As a member of WTO, India has been able to increase export of its agro products.
₪ Due to increase in export, and foreign investment has been increased in foreign exchange.
Just becoming member won’t help. It is especially dependent on how fast India increases it’s
infrastructural facilities and how developed countries treat India.
Sustainable Development
“Sustainable development is the development which meets the needs of present generation
without compromising with the ability of future generations to meet their own needs.”
The way and the speed with which present generation is developing, it cannot be maintained the
future. There is a fear that luxuries which present generation is enjoying may not be there for
future generation.
• 1]India tried to achieve speedy economic development by

implementing___________.
• 2]Which policies were announced for economic development of India?
• 3]in which year,new industrial policy was declared ?
• 4]Which three economic reforms were implemented in Industrial policy?
• 5] What is Economic Liberalization?
• 6] Mention the main economic reforms related to liberalization made in 1991.
• 7]Mention the advantages of Liberalization.
• 8]Mention the disadvantages of Liberalization.
• 9] What is Privatization?
• 10] Mention the methods taken by government to promote Privatization.
• 11] Mention the advantages of Privatization.
• 12] Mention the disadvantages of Privatization.
• 13 What is Globalization?
• 14] Mention the advantages of Globalization.
• 15] Mention the disadvantages of Globalization.
• 16] When was WTO established ?
• 17] Where is the headquarter of WTO located ?
• 18] Mention the objectives of WTO.
• 19]Mention the functions of WTO.
• 20] Mention the Impact of WTO on Indian Economy.
• 21] What is Sustainable Development ?
• 22] Mention the strategies to be adopted for conservation & preservation of natural
resources.
• 23]Mention the steps to be taken to protect environment.
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Weightage Marks [ 4 ]

CH-16- ECONOMIC LIBERALIZATION AND GLOBALIZATION

(1) Economic Liberalization:

• 1]India tried to achieve speedy economic development by

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