liberalisation and privatzation
Answers
Liberalisation :- prior to 1991, Indian Economy was marked by restrictions and isolation. Norms were more stringent in nature. Rules and laws which were aimed at regulating the economic activities became major hurdles in growth and development. To tackle this, Liberalisation was introduced. It simply ended these restrictions and opened up various sectors of the economy. Some of the important measures taken were Industrial sector reforms(deregulation & dereservations of Industrial sectors, abolishment of Licensing, extending industries to pvt. Sectors except few which were more of prime importance, prices were determined by markets), financial sector reforms(reducing the role of RBI from regulator to facilitator i.e. financial sector may take decisions on many matters without consulting the RBI, estd. of pvt. sector banks, Foreign institutional investors were allowed to invest in Indian financial markets), Tax reforms (reduction in taxes on individual income & corporate sector to overcome tax evasions, estd. of common national market for goods and commodities), Foreign exchange reforms(devaluation of rupee w.r.t. foreign currencies to resolve BOP crisis, exchange rates were determined by markets), Trade and Investment reforms (relaxing quantitative restrictions i.e. High tariffs on imports, removal of export duties, abolition of licensing procedures for imports). So,In nutshell, liberalisation means lessening of Rigid laws and giving more flexibility to economy.
Privatisation :- It refers to shedding of ownership or management of a government owned enterprise. Govt. companies are converted into pvt. one in two ways - I) By withdrawal of govt. from ownership and management of public sector companies and, II) Outright sale of public sector companies. Privatisation of the public sector enterprises by selling off part of the equity of PSEs to the public is known as disinvestment. The aim was, to improve financial discipline and facilitate modernisation.The govt. has also made attempts to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions. E.g. Some PSUs have been granted the status of maharatnas, navratnas & miniratnas.
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