WHAT IS LIBERALISATION, PRIVATISATION & GLOBALISATION (LPG)?

THE ECONOMY OF INDIA HAD UNDERGONE SIGNIFICANT POLICY SHIFTS IN THE BEGINNING
OF THE 1990s. THIS NEW MODEL OF ECONOMIC REFORMS IS COMMONLY KNOWN AS THE
LPG OR LIBERALISATION, PRIVATISATION & GLOBALISATION MODEL.

REASONS FOR IMPLEMENTING LPG

 LARGE & GROWING FISCAL IMBALANCES.

 GROWING INEFFICIENCY IN THE USE OF RESOURCES.
 LOW FOREIGN EXCHANGE RESERVES.
 HIGH INFLATION RATE (13.87% IN YEAR 1990-91).
 THE LOW ANNUAL GROWTH RATE OF INDIAN ECONOMY STAGNATED AROUND 3.5%
FROM 1950s TO 1980s, WHILE PER CAPITA INCOME AVERAGED 1.3%.

LIBERALISATION

LIBERALISATION REFERS TO RELAXATION OF GOVERNMENT RESTRICTIONS IN AREAS OF

ECONOMIC POLICIES.THUS, WHEN GOVERNMENT LIBERALISES TRADE IT MEANS IT HAS
REMOVED THE TARIFF, SUBSIDIES & OTHER RESTRICTIONS ON THE FLOW OF GOODS &
SERVICE BETWEEN COUNTRIES.

THE FRUITS OF LIBERALISATION REACHED THEIR PEAK IN 2007, WHEN INDIA RECORDED ITS
HIGHEST GDP GROWTH RATE OF 9%..WITH THIS, INDIA BECAME THE SECOND FASTEST
GROWING MAJOR ECONOMY IN THE WORLD, NEXT ONLY TO CHINA.

PRIVATISATION

IT REFERS TO THE TRANSFER OF ASSETS OR SERVICE FUNCTIONS FROM PUBLIC TO PRIVATE

OWNERSHIP OR CONTROL & THE OPENING OF THE CLOSED AREAS TO PRIVATE SECTOR
ENTRY.PRIVATISATION CAN BE ACHIVED IN MANY WAYS:

FRANCHISING, LEASING, CONTRACTING, ETC.

IN THE OTHER WORDS, IT IS THE REDUCTION OF OWNERSHIP OF THE MANAGEMENTOF A

GOVERNMENT – OWNED ENTERPRISE.

GOVERNMENT COMPANIES CAN BE CONVERTED INTO PRIVATE COMPANIES IN TWO

WAYS:

 BY DISINVESTMENT.
 BY WITHDRAWAL OF GOVERNMENTAL OWNERSHIP & MANAGEMENT OF PUBLIC
SECTOR COMPANIES.

GLOBALISATION
IT MEANS TO INTEGRATE THE ECONOMY OF ONE COUNTRY WITH THE GLOBAL
ECONOMY.DURING GLOBALISATION THE MAIN FOCUS IS ON FOREIGN TRADE & PRIVATE &
INSTITUTIONAL FOREIGN INVESTMENT.GLOBALISATION IS ATTEMPTING TO CREATE A
BORDERLESS WORLD, WHEREIN THE NEED OF ONE COUNTRY CAN BE DRIVEN FROM
ACROSS THE GLOBE & TURNING INTO ONE LARGE ECONOMY.

WRITE A SHORT NOTE ON INTERNATIONAL TRADE BLOCS - A) NAFTA B) EMU C) ASEAN:

TRADE BLOCS ARE A FORMAL AGREEMENT BETWEEN TWO OR MORE REGIONAL COUNTRIES
THAT REMOVE TRADE BARRIERS BETWEEN THE COUNTRIES IN THE AGREEMENT WHILE
KEEPING TRADE BARRIERS FOR OTHER COUNTRIES.THERE ARE VARIOUS KINDS OF TRADE
BLOCS:

1. FREE TRADE AREA

2. CUSTOMS UNION
3. COMMON MARKET
4. ECONOMIC UNION

EXAMPLES OF TRADING BLOCS:

 NAFTA (NORTH AMERICAN FREE TRADE AGREEMENT)

NAFTA IS AN AGREEMENT SIGNED BY CANADA, MEXICO, & THE UNITED STATES, CREATING
A TRILATERAL TRADE BLOC IN NORTH AMERICA , TO REMOVE TARIFF BARRIERS BETWEEN
THE THREE COUNTRIES.THE GOAL OF NAFTA WAS TO ELIMINATE BARRIERS TO TRADE &
INVESTMENT BETWEEN THE U.S.,CANADA & MEXICO. THE IMPLEMENTATION OF NAFTA ON
JANUARY 1 , 1994 , BROUGHT THE IMMEDIATE ELMINATION OF TARRIFS ON MORE THAN
ONE-HALF OF MEXICO’S EXPORTS TO THE U.S. & MORE THAN ONE-THIRD OF U.S. EXPORTS
TO MEXICO.IT ALSO PROTECTS COPYRIGHTS, PATENTS , & TRADEMARKS BETWEEN THOSE
THREE COUNTRIES.NAFTA’S PURPOSE IS TO ENCOURAGE ECONOMIC ACTIVITY BETWEEN
NORTH AMERICA’S THREE MAJOR ECONOMIC POWERS.

 EMU (ECONOMIC & MONETARY UNION)

AN EMU IS A TYPE OF TRADE BLOC COMPOSED OF AN ECONOMIC UNION (COMMON
MARKET & CUSTOMS UNION) WITH A MONETARY UNION. IT IS THE ECONOMIC &
MONETARY ARRANGEMENTS ESTABLISHED WITHIN THE EUROPEAN UNION TO PROVIDE A
SINGLE MARKET FOR GOODS, SERVICES, CAPITAL & LABOUR. THE MOST IMPORTANT
ASPECT OF EMU IS THE SINGLE EUROPEAN CURRENCY, THE EURO, WHICH WAS
INTRODUCED IN 1999.
ECONOMIC & MONETARY UNION TAKES THE EU (EUROPEAN UNION) ONE STEP
FURTHER IN ITS PROCESS OF ECONOMIC INTEGRATION, WHICH STARTED IN 1957 WHEN IT
WAS FOUNDED.IN PRACTICAL TERMS , EMU MEANS : COORDINATION OF ECONOMIC
POLICY MAKING BETWEEN MEMBER STATES. COORDINATION OF FISCAL POLICIES, NOTABLY
THROUGH LIMITS ON GOVERNMENT DEBT & DEFICIT.
 ASEAN (ASSOCIATION OF SOUTHEAST ASIAN NATIONS)
THE ASEAN IS A REGIONAL INTERGOVERNMENTAL ORGANISATION COMPRISING 10
COUNTRIES IN SOUTHEAST ASIA, WHICH PROMOTES INTERGOVERNMENTAL COOPERATION
& FACILITATES ECONOMIC, POLITICAL , SECURITY , MILITARY , EDUCATIONAL, &
SOCIOCULTURAL INTEGRATION AMONG ITS MEMBERS & OTHER COUNTRIES IN ASIA.
THERE ARE CURRENTLY 10 MEMBER STATES: INDONESIA, MALAYSIA, PHILLIPINES,
SINGAPORE, THAILAND, BRUNEI, LAOS, MYANMAR, CAMBODIA & VIETNAM.
THE AIM WAS TO PROMOTE STABILITY IN THE REGION.IT AIMS TO PROMOTE
COLLABORATION & COOPERATION AMONG MEMBER STATES, AS WELL AS TO ADVANCE THE
INTERESTS OF THE REGION AS A WHOLE , INCLUDING ECONOMIC & TRADE GROWTH.

WRITE A SHORT NOTE ON IMF:

THE INTERNATIONAL MONETARY FUND (IMF) IS AN ORGANIZATION OF 189 COUNTRIES,

WORKING TO FOSTER GLOBAL MONETARY COOPERATION, SECURE FINANCIAL STABILITY,
FACILITATE INTERNATIONAL TRADE, PROMOTE HIGH EMPLOYMENT AND SUSTAINABLE
ECONOMIC GROWTH, AND REDUCE POVERTY AROUND THE WORLD. CREATED IN 1945, THE
IMF IS GOVERNED BY AND ACCOUNTABLE TO THE 189 COUNTRIES THAT MAKE UP ITS NEAR-
GLOBAL MEMBERSHIP. THE IMF'S PRIMARY PURPOSE IS TO ENSURE THE STABILITY OF THE
INTERNATIONAL MONETARY SYSTEM—THE SYSTEM OF EXCHANGE RATES AND
INTERNATIONAL PAYMENTS THAT ENABLES COUNTRIES (AND THEIR CITIZENS) TO
TRANSACT WITH EACH OTHER.

ITS THREE PRIMARY FUNCTIONS WERE: TO OVERSEE THE FIXED EXCHANGE

RATE ARRANGEMENTS BETWEEN COUNTRIES, THUS HELPING NATIONAL GOVERNMENTS
MANAGE THEIR EXCHANGE RATES AND ALLOWING THESE GOVERNMENTS TO PRIORITIZE
ECONOMIC GROWTH, AND TO PROVIDE SHORT-TERM CAPITAL TO AID THE BALANCE OF
PAYMENTS. THIS ASSISTANCE WAS MEANT TO PREVENT THE SPREAD OF
INTERNATIONAL ECONOMIC CRISES. THE IMF WAS ALSO INTENDED TO HELP MEND THE
PIECES OF THE INTERNATIONAL ECONOMY AFTER THE GREAT DEPRESSION AND WORLD
WAR II. AS WELL, TO PROVIDE CAPITAL INVESTMENTS FOR ECONOMIC GROWTH AND
PROJECTS SUCH AS INFRASTRUCTURE.

IMF CONDITIONALITY IS A SET OF POLICIES OR CONDITIONS THAT THE IMF REQUIRES IN

EXCHANGE FOR FINANCIAL RESOURCES. THE IMF DOES REQUIRE COLLATERAL FROM
COUNTRIES FOR LOANS BUT ALSO REQUIRES THE GOVERNMENT SEEKING ASSISTANCE TO
CORRECT ITS MACROECONOMIC IMBALANCES IN THE FORM OF POLICY REFORM.IF THE
CONDITIONS ARE NOT MET, THE FUNDS ARE WITHHELD.THE CONCEPT OF CONDITIONALITY
WAS INTRODUCED IN A 1952 EXECUTIVE BOARD DECISION AND LATER INCORPORATED
INTO THE ARTICLES OF AGREEMENT.

WRITE SHORT NOTE ON IBRD (INTERNATIONAL BANKS FOR RECONSTRUCTION &

DEVELOPMENT):
 THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRD)
IS AN INTERNATIONAL FINANCIAL INSTITUTION THAT OFFERS LOANS TO MIDDLE-
INCOME DEVELOPING COUNTRIES. THE IBRD IS THE FIRST OF FIVE MEMBER INSTITUTIONS
THAT COMPOSE THE WORLD BANK GROUP, AND IS HEADQUARTERED IN WASHINGTON,
D.C., UNITED STATES. IT WAS ESTABLISHED IN 1944 WITH THE MISSION OF FINANCING THE
RECONSTRUCTION OF EUROPEAN NATIONS DEVASTATED BY WORLD WAR II. THE IBRD AND
ITS CONCESSIONAL LENDING ARM, THE INTERNATIONAL DEVELOPMENT ASSOCIATION, ARE
COLLECTIVELY KNOWN AS THE WORLD BANK AS THEY SHARE THE SAME LEADERSHIP AND
STAFF. FOLLOWING THE RECONSTRUCTION OF EUROPE, THE BANK'S MANDATE EXPANDED
TO ADVANCING WORLDWIDE ECONOMIC DEVELOPMENT AND ERADICATING POVERTY. THE
IBRD PROVIDES COMMERCIAL-GRADE OR CONCESSIONAL FINANCING TO SOVEREIGN
STATES TO FUND PROJECTS THAT SEEK TO IMPROVE TRANSPORTATION
AND INFRASTRUCTURE, EDUCATION, DOMESTIC POLICY, ENVIRONMENTAL
CONSCIOUSNESS, ENERGY INVESTMENTS, HEALTHCARE, ACCESS TO FOOD AND POTABLE
WATER, AND ACCESS TO IMPROVED SANITATION.
THE IBRD IS OWNED AND GOVERNED BY ITS MEMBER STATES, BUT HAS ITS OWN
EXECUTIVE LEADERSHIP AND STAFF WHICH CONDUCT ITS NORMAL BUSINESS OPERATIONS.
THE BANK'S MEMBER GOVERNMENTS ARE SHAREHOLDERS WHICH CONTRIBUTE PAID-IN
CAPITAL AND HAVE THE RIGHT TO VOTE ON ITS MATTERS. IN ADDITION TO CONTRIBUTIONS
FROM ITS MEMBER NATIONS, THE IBRD ACQUIRES MOST OF ITS CAPITAL BY BORROWING
ON INTERNATIONAL CAPITAL MARKETS THROUGH BOND ISSUES.
THE IBRD IS GOVERNED BY THE WORLD BANK'S BOARD OF GOVERNORS WHICH MEETS
ANNUALLY AND CONSISTS OF ONE GOVERNOR PER MEMBER COUNTRY (MOST OFTEN THE
COUNTRY'S FINANCE MINISTER OR TREASURY SECRETARY).
THE IBRD PROVIDES FINANCIAL SERVICES AS WELL AS STRATEGIC COORDINATION AND
INFORMATION SERVICES TO ITS BORROWING MEMBER COUNTRIES. THE BANK ONLY
FINANCES SOVEREIGN GOVERNMENTS DIRECTLY, OR PROJECTS BACKED BY SOVEREIGN
GOVERNMENTS.

WRITE A SHORT NOTE ON WTO:

THE WORLD TRADE ORGANIZATION (WTO) IS THE ONLY GLOBAL INTERNATIONAL
ORGANIZATION DEALING WITH THE RULES OF TRADE BETWEEN NATIONS. AT ITS HEART ARE
THE WTO AGREEMENTS, NEGOTIATED AND SIGNED BY THE BULK OF THE WORLD’S TRADING
NATIONS AND RATIFIED IN THEIR PARLIAMENTS. THE GOAL IS TO ENSURE THAT TRADE
FLOWS AS SMOOTHLY, PREDICTABLY AND FREELY AS POSSIBLE.
THE WORLD TRADE ORGANIZATION (WTO) IS AN INTERGOVERNMENTAL
ORGANIZATION THAT IS CONCERNED WITH THE REGULATION OF INTERNATIONAL
TRADEBETWEEN NATIONS. THE WTO OFFICIALLY COMMENCED ON 1 JANUARY 1995 UNDER
THE MARRAKESH AGREEMENT, SIGNED BY 124 NATIONS ON 15 APRIL 1994, REPLACING
THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT), WHICH COMMENCED IN 1948.
IT IS THE LARGEST INTERNATIONAL ECONOMIC ORGANIZATION IN THE WORLD.
THE WTO DEALS WITH REGULATION OF TRADE IN GOODS, SERVICES AND INTELLECTUAL
PROPERTY BETWEEN PARTICIPATING COUNTRIES BY PROVIDING A FRAMEWORK FOR
NEGOTIATING TRADE AGREEMENTS AND A DISPUTE RESOLUTION PROCESS AIMED AT
ENFORCING PARTICIPANTS' ADHERENCE TO WTO AGREEMENTS, WHICH ARE SIGNED BY
REPRESENTATIVES OF MEMBER GOVERNMENTS AND RATIFIED BY THEIR PARLIAMENTS. THE
WTO PROHIBITS DISCRIMINATION BETWEEN TRADING PARTNERS, BUT PROVIDES
EXCEPTIONS FOR ENVIRONMENTAL PROTECTION, NATIONAL SECURITY, AND OTHER
IMPORTANT GOALS. TRADE-RELATED DISPUTES ARE RESOLVED BY INDEPENDENT JUDGES
AT THE WTO THROUGH A DISPUTE RESOLUTION PROCESS.[9]
THE WTO'S CURRENT DIRECTOR-GENERAL IS ROBERTO AZEVÊDO, WHO LEADS A STAFF OF
OVER 600 PEOPLE IN GENEVA, SWITZERLAND.