LIBERALIZATION, PRIVATIZATION AND

GLOBALIZATIONAND ITS IMPACT ON

INDIAN ECONOMY
NIP (LPG)

By:-
Dr P.V Khatri
(Acting Principal ,Swami
Shraddhanand College)
NEW ECONOMIC POLICY(1991)-
LIBERALIZATION ,PRIVATIZATION AND
GLOBALIZATION (LPG)
LPG phenomenon was first initiated in the Indian
Economy in 1991 by the union finance minister
Dr. Manmohan singh
 There was decline in the country’s

 export earnings

 national income

 industrial output.

That is when the government decided to introduce

the New Industrial Policy (NIP) in 1991 to start
liberalizing the Indian economy
 NEED FOR LPG
 Initiate rapid economic growth to raise the
standard of living, reduce the widespread un.
Become self- reliant and set up a strong industrial
base with emphasis on heavy and basic industries;
 Achieve balanced regional development by
establishing industries across the country
 Reduce inequalities of income and wealth

 . Adopt a socialist pattern of development — based

on equality and prevent exploitation of man by man.
 employment and poverty stalking the land
 THE MAJOR OBJECTIVE OF THE
NEW ECONOMIC POLICY
 1. Utilizing fully the indigenous capabilities of entrepreneurs.
 2. Fostering research and development efforts for the
development of indigenous technologies.
 3. Raising investments.
 4. Removing regulator system and other weaknesses.
 5. Improvement in efficiency and productivity.
 6. Controlling monopolistic power.
 7. Assigning the right areas for the public sector undertakings.
 8. Ensuring welfare as also skills and facilities to the workers
to enable them to face new technologies.
 9. Retaining the capacity to earn our own foreign exchange
through exports.
 10. To achieve self-reliance
 LIBERALIZATION

Liberalization means elimination of state control over

economic activities
It is commonly known as free trade. It implies removal
of restrictions and barriers to free trade.
Liberalization refers to freedom to business enterprises
from excessive government control and they are given
freedom to make their own decisions regarding
production, consumption, pricing, marketing,
borrowing, lending & investments.
FEATURES OF THE POLICY OF
LIBERALISATION :
Abolition of licensing
NIP’1991 abolished licensing for most industries
except 6 industries of strategic significance. They
include
 Alcohol,

 Cigarettes,

 Industrial explosives,

 Defense products ,

 Drugs and pharmaceuticals,

 Hazardous chemicals and certain others reserved

for the public sector.
2.LIBERALIZATION OF FOREIGN
INVESTMENT
Automatic approvals were given for Foreign Direct
Investment (FDI) to flow into the country. FDI
including sectors such as
 Hotel and tourism,

 Infrastructure,

 Software development .etc.

 Use of foreign brand name or trade mark was

permitted for sale of goods
3.RELAXATION OF LOCATION
RESTRICTIONS
There is no requirement for obtaining approval from
the Central Government for setting up industries
anywhere in the country except those specified
under compulsory licensing or in cities with
population exceeding1 million. Polluting industries
were required to be located 25 kms away from the
city peripheries if the city population was greater
than 1 million.
PRIVATIZATION

The transfer of ownership, property or business from

the government to the private sector is termed
privatization
The government ceases to be the owner of the entity
or business
FEATURES OF PRIVATIZATION

 Decentralization the transfer of the ownership of

productive assets to the private sector.
 Entry of private sector industries into the areas
exclusive reserved for the state sector or which are
considered exclusive monopolies of state.
 Limiting the scope of the public sector or no more
diversification of existing public sector
understandings.
 GLOBALIZATIO
N
Globalization means integration of the national economy
with the world economy. It implies
 free flow of information,
 ideas, technology,
 goods and services,
 capital and even people across different countries
and societies.
It increases connectivity between different markets in the
form of trade, investments and cultural exchanges
FEATURES OF
GLOBALIZATION
 INDUSTRIAL POLICY CHANGES
Pre-1991 Policy Current Policy
Industrial Licensing was the new rule Licensing is an exception

Public sector monopoly/dominance in All but two industries are open to

strategic, basic and heavy industries the private sector

MRTP Act restriction on entry and growth No such restrictions

of large companies

Foreign investment allowed only in select Foreign investment allowed in a large

industries that too subject to normally, a number of industries, including up to
ceiling of 40% of total equity and prior 100% or equity in many of them.
permissions Automatic route available subject to
specified conditions.

Restrictive policy towards foreign Very liberal policy towards foreign

technology technology

Reservation of large number of products Reservation list is being pruned.

for small scale sector
POSITIVE IMPACT OF LPG ON
INDIAN ECONOMY
1) Increase in GDP growth rate
1990-1991- 1.1%
2014-2015 - 7.26%
2015-2016- 7.5%
(Source -http://statisticstimes.com/economy/gdp-of-india.php)

Because of the Abolition of Industrial licensing,

privatization, advanced foreign technology and
Reduction of taxes India’s GDP is increased after
1991 reforms
2 INCREASE IN FOREIGN DIRECT
INVESTMENT (FDI)
 1991 FDI inflow was 408 crores
 FDI inflow in India was 106,693 Crores in 2015

 India has allowed 100% FDI in medical services,

Telecom sector, and single brand retail Etc.
 .FDI cap increased in insurance & sub-activities
from 26% to 49%
 In Private Banking- Except branches or wholly
owned subsidiaries (74%)
 FDI is allowed and in Public sector banking
20%
3) INCREASE IN PER CAPITA
INCOME-
Per capita income or average income measures the average
income earned per person in a given area (city, region, country,
etc.). It is calculated by dividing the area's total income by its
total population
.

Yea Per Capita Income

r Rs.11535
1991 Rs. 88,533
2015

Per Capita income is increased due to Increase in

Employment, due to new economy policy of globalization
and privatization many job opportunities are created so,
people’s income was increased.
4) UNEMPLOYMENT RATE IS
REDUCED
Unemployment Rate
1991 - 4.3%
2014 - 3.6%
(Source : World
Development Indicators,
World Bank )

5. Privatization has resulted into reduction

of the government's financial and
administrative burden.
INCREASE IN MERGERS AND JOINT VENTURES AFTER
NEW ECONOMIC POLICY,1991
TECHNOLOGICAL IMPACT OF
GLOBALIZATION IN INDIA
 Scientific and technological innovations have made life
quite comfortable, fast and enjoyable.
 Internet facility is everywhere and extension of internet
facilities even to rural areas.
 Access to television grew from 20% of the urban
population (1991) to 90% of the urban population
(2009). Even in the rural areas satellite television has a
grown up market.
 internationalization of financial markets
 growing importance of MNCs
 popularization of mass media and communication
technologies such as cell phones, credit cards and e-
commerce which has transformed the way we do
business today.
IMPACT OF NEW LPG ON BANKING SECTOR
NEP(LPG)- SERVICE SECTOR
GROWTH
The services sector is now the largest and fastest
growing sector of the economy, contributing more
than 50% to the GDP

India’s Central Statistics Office classifies the

services sector into four main industries:
1) restaurants, hotels and trade
2) storage, communication and
transportation
3) finance, insurance, business services and real
estate
4) social, personal and community services.
NEP(LPG)- SERVICE SECTOR GROWTH
Thank You