Liberisation

Meenakshi Handa

Liberalisation
Liberalisation to a relaxation of previous
government restrictions, usually in such
areas of social, political and economic policy.
This concept is referred to asderegulation.

Economic liberalisation in India

Theeconomic liberalisation
in Indiarefers to the
ongoingeconomic
liberalisation, initiated in 1991,
of the country's economic
policies, with the goal of
making the economy more
market-oriented and expanding
the role of private and foreign
investment.
Specific changes include a
reduction in import tariffs,
deregulation of markets,
reduction of taxes, and greater
foreign investment.

Impact
The low annual growth rate of theeconomy of Indiabefore 1980,
which stagnated around 3.5% from 1950s to 1980s, while per capita
income averaged 1.3%.At the same time,Pakistangrew by
5%,Indonesiaby 9%,Thailandby 9%,South Koreaby 10%
andTaiwanby 12%.
Only four or five licences would be given for steel, electrical power
and communications. Licence owners built up huge powerful empires.
A huge private sector emerged. State-owned enterprises made large
losses.

Impact
Income Tax Department and
Customs Department
became efficient in checking
tax evasion.
Infrastructure investment
was poor because of the
public sector monopoly.
Licence Raj established the
"irresponsible, selfperpetuating bureaucracy
that still exists throughout
much of the country"and
corruption flourished under
this system.

Trade liberalisation
All countries that have had sustained growth and prosperity have opened up their
markets to trade and investment.
By liberalising trade and capitalising on areas of comparative advantage, countries
can benefit economically.
Use of resources - land, labour, physical and human capital - should focus on what
countries do best.
Trade liberalisation measures should be taken on a multilateral basis and
complemented by appropriate employment, labour and education policies, so that the
benefits of trade can be shared.

Benefits
Consumers ultimately benefit because liberalised trade can help
to lower prices and broaden the range of quality goods and
services available.
Companies can benefit because liberalised trade diversifies risks
and channels resources to where returns are highest.
When accompanied by appropriate domestic policies, trade
openness also facilitates competition, investment and increases
in productivity.

Downside
Trade reforms, even if beneficial for a country overall,
may negatively affect some industries or some jobs and
many commentators worry about negative effects on the
environment.
The solution to these problems is not to restrict trade.
They should be tackled directly at source through labour,
education and environmental policies.

Privatisation and
Globalisation
Privatisation refers to the participation of
private entities in businesses and services
and transfer of ownership from the public
sector (or government) to the private
sector as well.
Globalisation stands for the consolidation
of the various economies of the world.

Conclusion