State four features of economic policy as pursued in India till 1991
Answers
1. Delicencing. Only six industries were kept under Licencing scheme.
2. Entry to Private Sector. The role of public sector was limited only to four industries; rest all the industries were opened for private sector also.
3. Disinvestment. Disinvestment was carried out in many public sector enterprises.
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4. Liberalisation of Foreign Policy. The limit of foreign equity was raised to 100% in many activities, i.e., NRI and foreign investors were permitted to invest in Indian companies.
5. Liberalisation in Technical Area. Automatic permission was given to Indian companies for signing technology agreements with foreign companies.
6. Setting up of Foreign Investment Promotion Board (FIPB). This board was set up to promote and bring foreign investment in India.
7. Setting up of Small Scale Industries. Various benefits were offered to small scale industries.
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Answer:
1. Liberalisation:
Liberalisation refers to end of licence, quota and many more restrictions and controls which were put on industries before 1991. Indian companies got liberalisation in the following way:
(a) Abolition of licence except in few.
(b) No restriction on expansion or contraction of business activities.
(c) Freedom in fixing prices.
(d) Liberalisation in import and export.
(e) Easy and simplifying the procedure to attract foreign capital in India.
(f) Freedom in movement of goods and services
(g) Freedom in fixing the prices of goods and services.
2. Privatisation:
Privatisation refers to giving greater role to private sector and reducing the role of public sector. To execute policy of privatisation government took the following steps:
(a) Disinvestment of public sector, i.e., transfer of public sector enterprise to private sector
(b) Setting up of Board of Industrial and Financial Reconstruction (BIFR). This board was set up to revive sick units in public sector enterprises suffering loss.
(c) Dilution of Stake of the Government. If in the process of disinvestments private sector acquires more than 51% shares then it results in transfer of ownership and management to the private sector.
3. Globalisation:
It refers to integration of various economies of world. Till 1991 Indian government was following strict policy in regard to import and foreign investment in regard to licensing of imports, tariff, restrictions, etc. but after new policy government adopted policy of globalisation by taking following measures:
(i) Import Liberalisation. Government removed many restrictions from import of capital goods.
(ii) Foreign Exchange Regulation Act (FERA) was replaced by Foreign Exchange Management Act (FEMA)
(iii) Rationalisation of Tariff structure
(iv) Abolition of Export duty.
(v) Reduction of Import duty.
As a result of globalisation physical boundaries and political boundaries remained no barriers for business enterprise. Whole world becomes a global village.
Globalisation involves greater interaction and interdependence among the various nations of global economy.
Impact of Changes in Economic Policy on the Business or Effects of Liberalisation and Globalisation:
The factors and forces of business environment have lot of influence over the business. The common influence and impact of such changes in business and industry are explained below: