Question.
What do you understand by liberalization, privatization, and globalization? How have they helped industrial development in India?
(NCERT class 12 geography, India People and Economy, Chapter-8-Manufacturing Industries)
Answer.
The New Industrial Development Policy was introduced in India in 1991 to increase productivity, create jobs, and achieve international competitiveness in all sectors of the economy.
The New Industrial Policy of 1991 has three main dimensions; Liberalisation, Privatization, and Globalization.
Liberalization:
Liberalization means giving freedom to consumers to buy what they want from domestic or foreign markets; To give freedom to the manufacturers to produce as they wish as well as to sell or buy from the domestic market or abroad.
Under the liberalization policy;
- Industrial policy has been liberalized to attract private investors, both domestic and multinational.
- The asset limit for investment in the licensed area has been removed.
- Industrial licensing policy for most sectors was abolished except for six industries related to safety, strategic or environmental concerns.
- Free access to foreign technology was provided.
- Free and equal access to the capital market was provided to all.
- Manufacturers and sellers can export or import their finished goods or raw materials.
- The phased manufacturing program ended.
- Industrial space programs were liberalized and manufacturers were free to set up their factories where they felt fit.
Privatization:
- Privatization means the transfer of ownership from public/government to private by sale or disinvestment.
- Some sectors such as mining, telecommunications, highway construction, and management which were earlier not open to the private sector, have now been opened to the private sector.
- Under privatization, the number of industries reserved for the public sector has been reduced from 17 to 4 since 1956. Apart from industries related to nuclear power and railways, all other industries are either closed or privatized.
Globalization:
- Globalization means linking the economy of the country with the world economy. Under globalization, capital, labor, and resources as well as goods and services can move freely from one country to another.
- Globalization in India's scenario means opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in various sectors.
- Removal of barriers and restrictions in the entry for MNCs.
- Allowing Indian companies to have foreign collaboration in India and to set up joint ventures.
- The LPG reforms of 1991 led to large-scale industrial development in India.
LPG reformed helped in the following things;
- The advent(of foreign technology) of technology in the Indian economy helped in industrial development.
- With the rapid development of the industrial and service sectors came an increase in economic opportunity and employment.
- Foreign exchange reserves increase with the introduction of FDI and increase in export.
- India's share in global exports and imports increased.
- India is now the largest recipient of remittances.
- Globalization and liberalization led to an increase in the choice of goods and services of the people.
- Due to LPG reforms, almost all global brands of goods are available in the Indian market.
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