PPT 1 on liberalization and privati.pptx

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1. Indian E conomic policy :1947 to 1990 Economic policy in this era was driven by past colonial experience of Indian leadership. Socialism Protectionism Import substitution State Intervention Five year planning commission Red Tape/ license raj 2

2. Reasons for implementing LPG Excess of consumption and expenditure over revenue resulting in heavy govt. borrowings. Growing inefficiency on the use of resources. Over protection to industries. Growing trade deficit. Increase in losses for public sector enterprises. Various distortion like shortage of foreign exchange and borrowing from abroad. Low foreign exchange reserves. Inflation 3

3. Factors that forced India for E conomic R eforms A Balance of Payments crisis in 1991 which pushed the country to near bankruptcy. The Rupee devalued and economic reforms were forced upon India. India central banks foreign exchange reserves had reduced to the point that India could barely finance three weeks’ worth of imports . 4

4. For Availing loan , IMF and World Bank expected India to: Liberalise and open up the economy by removing restrictions on the private sector, Reduce the role of the government in many areas Remove trade restrictions. India agreed to the conditionalities of World Bank and IMF.

5. Economic Reforms Since 1991- New Economic Policy

6. ECONOMIC REFORMS: Economic reforms or structural adjustment is a long-term multi-dimensional package of various policies and programmes for further economic development. NEP1991: In July 1991, Prime Minister Narasimha Rao along with his Finance Minister Manmohan Sigh initiated the economic liberalisation of 1991, to remove the inefficiencies in the economic system.

7. OBJECTIVES OF NEP1991: To reduce fiscal deficit and to have relative price stability. To reduce the area of operation of the public sector and to open up more areas for the private sector. To liberalise industrial policy and abolish industrial licensing for most of the private sector industries. To encourage inflow of foreign capital by granting more concessions to foreign direct investment. To liberalise foreign trade by reducing tariff duties and abolishing quota restrictions in case of many imports.

8. Components of NEP 1991 MACROECONOMIC STABILISATION- demand side management: This is a short-run measures to return to low and stable inflation and a sustainable fiscal and balance of payments position. Control of inflation Fiscal correction Improvement in a balance of payment s situation

9. 2.Structural adjustment –supply side management This is a long run measures to remove the bottlenecks and obstacles in the growth path of an economy. These policies includes : Trade and capital flow reforms Industrial deregulation Public sector reforms and disinvestment Financial sector reforms The goals is to abolish controls, eliminate bureaucratic hurdles and redtapism and make the decision making process efficient and transparent.

10. NEP –Policy of Liberalisation, Privatisation And Globalisation(LPG) Structural reforms can be seen with respect to: Liberalisation Privatisation globalisation

11. LIBERALISATION Liberalisation means removing all unnecessary controls and restrictions like permits, licenses, protectionist duties, quotas, etc. imposed by the government. In 1991, government was enforcing regulation in many ways. Industrial licensing Private sector was not allowed in many industries. Some goods only produced in small scale industries. Price controls and control on distribution of selected industrial products.

12. Import licence. Foreign exchange control Restrictions on investment by big business house etc. These controls resulted in: Consumption delays Inefficiency Losses High cost economy

13. Objectives of liberalisation To raise internal competitiveness of industrial production. To raise foreign investment and technology. To reduce debt burden of the country. To get an opportunity to export to developed countries and to import capital goods and machinery from them.

14. Liberalisation Measures

15. Industrial sector reforms Except for 6 industries related to security and strategic concerns: Liquor Cigarettes Industrial explosives Defence equipments Drugs and pharmaceuticals Dangerous chemicals Abolition of Industrial Licensing. Contraction of public sector. Reforms in small scale sector Concessions in the MRTP Act.

16. PRIVATISATION

17. PRIVATISATION Improving govt: financial composition Raising funds from the sales Improving the performance of an enterprise Increasing efficiency Requiring enterprises to meet performance objectives Relief from public sector financial constraints. It is defined as the transfer of a function, activity or organisation from the public to the private sector . Objectives :

18. Privatisation measures means sale of a part of equity holdings held by the government in any public sector undertaking to private investor. Two methods: Minority sale Strategic sale The govt : has decided to give special treatment to some of the important profit making PSUs and they were given the status of Navratnas . Disinvestment 2.Policy for Navratnas .

19. GLOBALISATION

20. ECONOMICS HUMOR……………

21. GLOBALISATION It refers to growing economic interdependence among countries in the world with regard to technology, capital, information, goods and services etc:

22. SCOPE

23. STRATEGIES FOR GOING GLOBAL Companies desiring to enter the foreign markets, face the dilemma while deciding method of entry into a given overseas location. Companies can reduce this dilemma by analyzing the decision factors. Decision Factors:   Ownership Advantages Location Advantages Customer Needs, Preferences and Tastes Logistic Requirements Cheap Land Acquisition Cost Cheap Labour Political Stability Low Cost Raw Materials Climatic Conditions. 3. Internationalisation Advantages

24. Factors Influencing International Business capitalism communism socialism privatisation Economic growth Corruption Regulatory Climate

25. Trade Promotion theories

26. Case Study https://youtu.be/32_fm92-EF8

27. Critically answer? 1. Identify the drivers of Walmart new interest in Japan. 2. Demonstrate the challenges faced by Walmart affecting its strategies. Student Task!!!!!!!!!!! Design a model or a conceptual framework for Walmart based on past literature analysis and current scenario learning and help Walmart to compete in Japan.

28. Case : https://youtu.be/BXXdcgchAVw

29. Learning Objective LO-1 Understand what is meant by Globalization LO-2 Recognize the main drivers of Globalization LO-3 Understand how the process of Globalization is creating opportunities and challenges for business managers.

30. Main Organisations for Facilitating Globalisation IMF WORLD BANK WTO

31. Impact of LPG 1. Economic Growth 2.FDI & FII 3.Trade 4.Check on Fiscal Deficit 5.Check on Inflation

32. Economic Impact of Programs like Digital India

33. Student Activity(Case Study) In 1991, India faced a severe balance of payments crisis, which necessitated a shift in economic policy. The government introduced the Liberalization, Privatization, and Globalization (LPG) policy to address the crisis and stimulate economic growth. The LPG policy marked a significant departure from the earlier import substitution strategy and aimed to open up the Indian economy to global markets. Liberalization involved reducing government control over the economy, easing restrictions on foreign trade, and allowing greater freedom for private sector enterprises. Privatization focused on reducing state ownership in public enterprises and encouraging private sector participation. Globalization aimed at integrating the Indian economy with the global economy by promoting exports, attracting foreign direct investment (FDI), and participating in international trade.The LPG policy had a transformative impact on various sectors of the Indian economy, including manufacturing, services, and agriculture. It spurred economic growth, improved industrial productivity, and enhanced India's global competitiveness. However, the policy also led to challenges such as increased inequality and regional disparities. Questions Evaluate the impact of the LPG policy on India's manufacturing sector. How did liberalization and privatization contribute to the sector's growth and global competitiveness? Discuss the social implications of the LPG policy in India. How did the policy affect income distribution and employment opportunities, particularly in rural versus urban areas?

34. Test your Knowledge 1. How has the LPG policy affected the global competitiveness of businesses in emerging markets? Discuss the role of globalization in enhancing or inhibiting competitive advantage. 2. What are the potential future challenges and opportunities for economies that have embraced the LPG policy? Predict the long-term effects on economic stability and growth.