GLOBALISATION & DECLINE IN

PUBLIC SECTOR ECONOMY

-RASNEET OBEROI
SYBMS A
34.

GLOBALISATION IN INDIA
India had the distinction of being the

world's largest economy in the beginning of

the Christian era, as it accounted for about
32.9% share of world GDP and about 32.5%
of the world population. The goods
produced in India had long been exported
to far off destinations across the world.[1]
Therefore, the concept of globalization is
hardly new to India.

CONTENTS UNDER GLOBALISATION

1 Trade
2 Payments
3 Investment
4 Remittances
5 References

TRADE
India currently accounts for 1.2% of World trade as

of 2006 according to the World Trade Organization

(WTO). Until the liberalisation of 1991, India was
largely and intentionally isolated from the world
markets, to protect its fledgling economy and to
achieve self-reliance.
Foreign trade was subject to import tariffs, export
taxes and quantitative restrictions, while
foreign direct investment was restricted by upperlimit equity participation, restrictions on technology
transfer, export obligations and government
approvals; these approvals were needed for nearly
60% of new FDI in the industrial sector

PAYMENTS
Since independence, India's

balance of payments on its current account

has been negative. Since liberalisation in the
1990s (precipitated by a balance of payment
crisis), India's exports have been consistently
rising, covering 80.3% of its imports in 2002
03, up from 66.2% in 199091.
India's foreign currency reserves stood at
$285 billion in 2008, which could be used in
infrastructural development of the country if
used effectively.

INVESTMENT
Foreign direct investment in India has

reached 2% of GDP, compared with 0.1% in

1990, and Indian investment in other
countries rose sharply in 2006.[2]
As the fourth-largest economy in the world
in PPP terms, India is a preferred
destination for foreign direct investments
(FDI);[17] India has strengths in information
technology and other significant areas such
as auto components, chemicals, apparels,
pharmaceuticals, and jewelry.

DECLINE IN PUBLIC SECTOR

ECONOMY
At the global level, compelling combination

of circumstances leading to restructuring of

economics included successful global
economic performance of Japan and Asian
Tigers in 80s and 90s, based on a global
approach to production and competition; and
development of technologies, which changed
the very concept of productivity and even
geography led a serious thinking among
policy makers in India about the viability of
the Public Sector in Independent India.

Privatisation means transfer of management

control of a government enterprise to the

private company either with sale of a portion
of total equity or by lease.
Disinvestment means divesting a portion of
government equity in a government
enterprise to retail investors, mutual funds,
employees of the unit etc to raise funds. It
does not involve transfer of management.
Strategic Sale and privatisation are the same.

The policy of the Government on

disinvestments has evolved over a period of

ten years. It started with selling of minority
shares in 1991-92 and continues today with
emphasis on strategic sale.
The implementation of the present policy has
shown tremendous benefits of privatisation to
the taxpayers, the economy, the stock market
and the employees.

Before the year 2000, the government had

primarily sold minority shares in public sector

companies. The price realised through the sale
of shares, even in blue chip companies like IOC,
BPCL, HPCL, GAIL & VSNL was low. On the other
hand, the prices realised through strategic
disinvestments have been high.
Fears expressed by employees of Public Sectors
on disinvestments are unfounded. Of a total
workforce of about 350 million in the country,
the public sector employees are about 2 million.

STRATEGIC SALE
Sale of a portion or whole of Government

equity along with transfer of management

control is called Strategic Sale. The equity
sold is generally less than 25 per cent if the
recent experience starting from Modern
Foods to VSNL, IBP and IPCL are the
indications.

At the same time, each one has seen management

control transferred to the party that bid for and

bought the government equity. The advantages with
strategic sale are that
(1) It gets investment
(2) Proceeds are not wasted by the government
(3) The strategic partner with management control
will invest further for diversification and technological
improvement
(4) Market perception will improve as it is no longer a
government company
(5) And shareholder value will increase
(6) With the improvement of the functioning of the
company, workers' protection will also be guaranteed.

THANK YOU