what is liberalisation? describe any four effects of liberalisation on the Indian economy
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There have been revolutionary change in Indian Economy since the espousal of new economic strategy in 1991. This had great impacts on all areas of life in India. When a nation becomes liberalized, the economic effects can be intense for the country and for investors. Liberalization is defined as laws or rules being liberalized, or relaxed, by a government.
Investors face problems to enter in emerging market countries when there are lots of barriers. These barriers can include tax laws, foreign investment restrictions, legal issues and accounting regulations that can make it difficult or impossible to gain access to the nation. The economic liberalization process begins by relaxing these obstacles and relinquishing some control over the direction of the economy to the private sector.
One of the main effects of this improved flow of capital into the country is that it makes it inexpensive for companies to access capital from investors. A lower cost of capital enables companies to undertake lucrative projects that they may not have been able to with a higher cost of capital pre-liberalization, leading to higher growth rates.Another factor is stock market performance. Generally, when a country relaxes laws, taxes, the stock market values also rise. Stock Markets are platforms on which Corporate Securities can be traded in real time. It offers mechanisms for continuous price discovery, choices for investors to exit from or enter into investment any time. These are strong base of free markets these days and there is vigorous trade going all over the world on stock exchanges.Liberalization policies in country lessens the political risks to investors. The government can attract more foreign investment through liberalization in economic policies. These are areas that support and foster a readiness to do business in the country such as a strong legal foundation to settle disputes, fair and enforceable contract laws, property laws, and others that allow businesses and investors to operate with confidence.In liberalized economy, Investors gets benefit by being able to invest a portion of their portfolio into a diversifying asset class.In banking sector, liberal policies have great impact in Indian economy. Since improvements, there have been three rounds of License Grants for private banks. Private Banks such as ICICI, HDFC, Yes Bank and also foreign banks, raised standards of Indian Banking Industry. Now there is tough competition in the banking industry, and public sector banks are more responsive to customers.
Investors face problems to enter in emerging market countries when there are lots of barriers. These barriers can include tax laws, foreign investment restrictions, legal issues and accounting regulations that can make it difficult or impossible to gain access to the nation. The economic liberalization process begins by relaxing these obstacles and relinquishing some control over the direction of the economy to the private sector.
One of the main effects of this improved flow of capital into the country is that it makes it inexpensive for companies to access capital from investors. A lower cost of capital enables companies to undertake lucrative projects that they may not have been able to with a higher cost of capital pre-liberalization, leading to higher growth rates.Another factor is stock market performance. Generally, when a country relaxes laws, taxes, the stock market values also rise. Stock Markets are platforms on which Corporate Securities can be traded in real time. It offers mechanisms for continuous price discovery, choices for investors to exit from or enter into investment any time. These are strong base of free markets these days and there is vigorous trade going all over the world on stock exchanges.Liberalization policies in country lessens the political risks to investors. The government can attract more foreign investment through liberalization in economic policies. These are areas that support and foster a readiness to do business in the country such as a strong legal foundation to settle disputes, fair and enforceable contract laws, property laws, and others that allow businesses and investors to operate with confidence.In liberalized economy, Investors gets benefit by being able to invest a portion of their portfolio into a diversifying asset class.In banking sector, liberal policies have great impact in Indian economy. Since improvements, there have been three rounds of License Grants for private banks. Private Banks such as ICICI, HDFC, Yes Bank and also foreign banks, raised standards of Indian Banking Industry. Now there is tough competition in the banking industry, and public sector banks are more responsive to customers.
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Liberalization is a method through which a nation lifts limitations on some separate individual ventures. This process of liberalization occurs when anything which used to be prevented is no longer banned, or when state laws are relaxed. Following are the effects of liberalization on Indian economy:
1. It removed the obstacles to international trade and foreign ventures were partially eliminated.
2. It made it easier to export and import goods.
3. It allowed the setting up of the factories and offices.
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