BUISNESS ENVIRONMENT

“TO STUDY IMPLICATIONS AND EFFECTS OF LIBERALISATION ON BUISNESS”

FINAL DRAFT SUBMITTED IN THE FULFILLMENT OF THE COURSE TITLED

CRIMINAL LAW-II FOR OBTAINING THE DEGREE OF B.B.A LL.B (Hons.)

PROJECT PROPOSED BY:

NAME: VISHWAN UPADHYAY

ROLL NO.: 1864

SEMESTER: 4TH

SUBMITTED TO:

Dr. Manoj Mishra

FEBRUARY, 2019

CHANAKAYA NATIONAL LAW UNIVERSITY, NYAYA NAGAR,

MITHAPUR, PATNA- 800001

1
 BUISNESS ENVIRONMENT

DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.B.A., LL.B (Hons.) Project Report entitled
“Implications and effects of liberalization on Buisness” submitted at Chanakya National Law
University is an authentic record of my work carried out under the supervision of Dr. Manoj
Mishra.

I have not submitted this work elsewhere for any other degree or diploma. I am fully responsible
for the contents of my Project Report.

SIGNATURE OF CANDIDATE

NAME OF CANDIDATE: VISHWAN UPADHYAY

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

2
 BUISNESS ENVIRONMENT

ACKNOWLEDGEMENT

A project is a joint endeavour which is to be accomplished with utmost compassion, diligence and
with support of all. Gratitude is a noble response of one’s soul to kindness or help generously
rendered by another and its acknowledgement is the duty. I am overwhelmed in all humbleness
and gratefulness to acknowledge from the bottom of my heart to all those who have helped me to
put these ideas, well above the level of simplicity and into something concrete effectively and
moreover on time.

I would like to thank my faculty Dr. Manoj Mishra whose guidance helped me a lot with structuring
my project. I owe the present accomplishment of my project to my friends, who helped me
immensely with materials throughout the project and without whom I couldn’t have completed it
in the present way.

I would also like to extend my gratitude to my parents and all those unseen hands that helped me
out at every stage of my project.

THANK YOU,

NAME: Vishwan Upadhyay

COURSE: B.B.A., LL.B. (Hons.)

ROLL NO: 1864

SEMESTER: 4TH

3
 BUISNESS ENVIRONMENT

TABLE OF CONTENTS

1. What is liberalization

2. How it effects a country

3. Effects of liberalization on Indian economy and society

a. Growth rate

b. Industry

c. Agriculture

d. Services

e. Education Sector and Health Sector

4. Conclusion and Suggestions

5. Bibliography

4
 BUISNESS ENVIRONMENT

WHAT IS LIBERALIZATION?

Trade liberalization is the removal or reduction of restrictions or barriers on the free exchange of
goods between nations. These barriers include tariffs, such as duties and surcharges, and nontariff,
such as licensing rules and quotas. Economists often view the easing or eradication of these
restrictions as efforts to promote free trade1.

When a nation becomes liberalized, the economic effects can be profound for the country and for
investors. Economic liberalization refers to a country "opening up" to the rest of the world with
regards to trade, regulations, taxation and other areas that generally affect business in the country.
As a general rule, you can determine to what degree a country is liberalized economically by how
easy it is to invest and do business in the country. All developed (first world) countries have already
gone through this liberalization process, so the focus in this article is more on the developing and
emerging countries.

Investing in emerging market countries can sometimes be an impossible task if the country you're
investing in has several barriers to entry. These barriers can include tax laws, foreign investment
restrictions, and legal issues and accounting regulations, all of which make it difficult or
impossible to gain access to the country. The economic liberalization process begins by relaxing
these barriers and relinquishing some control over the direction of the economy to the private
sector. This often involves some form of deregulation and privatization of companies.

The primary goals of economic liberalization are the free flow of capital between nations and the
efficient allocation of resources and competitive advantages2. This is usually done by reducing
protectionist policies such as tariffs, trade laws and other trade barriers. One of the main effects of

1
Excerpt taken from www.invetopedia.com
2
https://www.investopedia.com/articles/economics/11/economic-benefits-country-liberalization.asp

5
 BUISNESS ENVIRONMENT

this increased flow of capital into the country is it makes it cheaper for companies to access capital
from investors. A lower cost of capital allows companies to undertake profitable projects they may
not have been able to with a higher cost of capital pre-liberalization, leading to higher growth rates.
This type of growth scenario unfolded in China in the late 1970s as the Chinese government set
on a path of significant economic reform. With a massive amount of resources (both human and
natural), they believed the country was not growing and prospering to its full potential. Thus, to
try to spark faster economic growth, China began major economic reforms that included
encouraging private ownership of businesses and property, relaxing international trade and foreign
investment restrictions, and relaxing state control over many aspects of the economy.
Subsequently, over the next several decades, China averaged a phenomenal real GDP growth rate
of over 10%.

6
 BUISNESS ENVIRONMENT

HOW LIBERALIZATION EFFECTS A COUNTRY

There have been revolutionary change in Indian Economy since the espousal of new economic
strategy in 1991. When a nation becomes liberalized, the economic effects can be intense for the
country and for investors. Many economist explained that economic liberalization is "opening
up" to the rest of the world with regards to trade, regulations, taxation and other areas that
generally affect business in the country.

 Major goals of economic liberalization are the free flow of capital between countries and
the effectual allocation of resources and competitive advantages. This is generally done
by decreasing protectionist strategies such as tariffs, trade laws and other trade barriers.
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

7
 BUISNESS ENVIRONMENT

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. Their Importance can be assessed from the fact that, behaviour of stock
markets of a country is strongest indicator of growth and future prospects of an economy.
These markets have thrown open range of associated services such as Investment
Banking, Asset Management, Underwriting services, Hedging advice etc. These
collectively employ lakhs of people all over India. Similarly there are commodities
market which provides avenues for investment and sale of various eligible commodities.
Fund managers and investors are always on the lookout for new prospects for profit, and
so a whole country that becomes available to be invested in will tend to cause a surge of
capital to flow in. The situation is similar in nature to the anticipation and flow of money
into an initial public offering (IPO). A private company that was formerly unavailable to
an investor that suddenly becomes available typically causes a similar valuation and cash
flow pattern. However, like an initial public offering, the initial eagerness also eventually
dies down and returns become more normal and more in line with basics.
 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. Also, government
administration is a common target area to be streamlined and improved in the
liberalization process. All these modifications can reduce the political risks for
depositors.
 In liberalized economy, Investors gets benefit by being able to invest a portion of their
portfolio into a diversifying asset class. Commonly, the correlation between developed
countries such as the United States and undeveloped or emergent countries is

8
 BUISNESS ENVIRONMENT

comparatively low. Although the general risk of the developing country by itself may be
higher than average, adding a low correlation asset to your portfolio can reduce your
portfolio's overall risk profile. However, a discrepancy should be made that although the
correlation may be low, when a country becomes liberalized, the relationship may
actually rise over time. This happens because the country becomes more incorporated
with other parts of the world and has become more sensitive to events that happen outside
the country. A high level of integration can also lead to increased contagion risk which is
the risk that crunches that occur in different countries cause crises in the domestic
country.
 With the advent of Information Technology in contemporary period, globalization
process increased and it made possible transfer of real time human labour across nations,
without transfer humans themselves. Additionally, it removed all boundaries which
hinder free flow of information. It has many benefits to investors such as sharing,
nurturing and development of knowledge in societies which earlier had access only to
substandard or non-updated information. As always package is coupled with some grim
realities too. All over the world, Governments has lost their capacity to control and ward
of against malevolent, false, sensitive information and content. Rise of Islamic State
establishes that information technology revolution has helped global Terrorism.
Furthermore, explicit content is freely available on web, to which immature children have
unhampered access.
 Liberalization is imperative for the growth of Indian economy. Barring few years,
industrial growth rate has not been so much inspiring. Share of Industry still remains
stagnantly low at 25%. It is discouraging that India has transitioned to be a service led
economy, directly from an agrarian one. One compensation of this is end of policy of
imports substitution which derived industrial growth up to 1990. Foreign companies got
free access to Indian markets and made domestic products uncompetitive. They
perceptibly had better access to technology and superior economies of scale.

9
 BUISNESS ENVIRONMENT

EFFECT OF LIBERALISATION ON INDIAN ECONOMY AND SOCIETY

The economic liberalisation in India refers to the changes and reforms, initiated in 1991, of the
country's economic policies, with the goal of making the economy more market- and service-
oriented, and expanding the role of private and foreign investment3. Most of these changes were
made as part of the conditions laid out by the World Bank and the IMF as a condition for a $500
million bail out to the Indian government in December 19914. Specific changes include a
reduction in import tariffs, deregulation of markets, reduction of taxes, and greater foreign
investment. Liberalisation has been credited by its proponents for the high economic growth
recorded by the country in the 1990s and 2000s. Its opponents have blamed it for increased
inequality and economic degradation. The overall direction of liberalisation has since remained
the same, irrespective of the ruling party, although no party has yet solved a variety of politically
difficult issues, such as liberalising labor laws and reducing agricultural subsidies. There exists a
lively debate in India as to whether the economic reforms were sustainable and beneficial to the
people of India as a whole5.

Indian government coalitions have been advised by the IMF and World Bank to continue
liberalisation. Before 2015, India grew at a slower pace than China, which had been liberalising
its economy since 1978. In 2015, India's GDP growth outpaced that of China6. The McKinsey
Quarterly stated that removing major obstacles "would free India's economy to grow as fast as
China's, at 10% a year"7.

3
Bank, The World (1991-11-12). "India - Structural Adjustment Credit Project (English) - Presidents report".
www.documents.worldbank.org. World bank: 1. Retrieved 30 October 2018.
4
"Structural adjustments in India - a reportof the Independent Evaluation Group (IEG)".
www.lnweb90.worldbank.org. World bank. Retrieved 30 October 2018.
5
Bank, The World (1991-11-12). "Project proposal - Structured adjustment of India".
www.documents.worldbank.org. World Bank: 1. Retrieved 30 October 2018.
6
"India outpaces China in 2015 economic growth". BBC News. 2016-02-08
7
"The McKinsey Quarterly: India – From emerging to surging" (PDF). The McKinsey Quarterly. 2001.

10
 BUISNESS ENVIRONMENT

PRE-LIBERALISATION POLICIES:

Indian economic policy after independence was influenced by the colonial experience (which
was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian
socialism. Policy tended towards protectionism, with a strong emphasis on import substitution
industrialization under state monitoring, state intervention at the micro level in all businesses
especially in labour and financial markets, a large public sector, business regulation, and central
planning. Five-Year Plans of India resembled central planning in the Soviet Union. Steel,
mining, machine tools, water, telecommunications, insurance, and electrical plants, among other
industries, were effectively nationalized in the mid-1950s. Elaborate licenses, regulations and the
accompanying red tape, commonly referred to as License Raj, were required to set up business in
India between 1947 and 1990.

“Before the process of reform began in 1991, the government attempted to close the Indian
economy to the outside world. The Indian currency, the rupee, was inconvertible and high tariffs
and import licensing prevented foreign goods reaching the market. India also operated a system
of central planning for the economy, in which firms required licences to invest and develop. The
labyrinthine bureaucracy often led to absurd restrictions—up to 80 agencies had to be satisfied
before a firm could be granted a licence to produce and the state would decide what was
produced, how much, at what price and what sources of capital were used. The government also
prevented firms from laying off workers or closing factories. The central pillar of the policy was
import substitution, the belief that India needed to rely on internal markets for development, not
international trade—a belief generated by a mixture of socialism and the experience of colonial
exploitation. Planning and the state, rather than markets, would determine how much investment
was needed in which sectors.”8

Attempts were made to liberalise the economy in 1966 and 1985. The first attempt was reversed
in 1967. Thereafter, a stronger version of socialism was adopted. The second major attempt was
in 1985 by Prime Minister Rajiv Gandhi. The process came to a halt in 1987, though a 1967 style

8
"India: the economy". BBC. 12 February 1998.

11
 BUISNESS ENVIRONMENT

reversal did not take place. In the 80s, the government led by Rajiv Gandhi started light reforms.
The government slightly reduced License Raj and also promoted the growth of the
telecommunications and software industries. The Chandra Shekhar Singh government (1990–
1991) took several significant steps towards the much needed reforms and laid its foundation.

Prime Minister Narasimha Rao, along with his finance minister Manmohan Singh, initiated the
economic liberalisation of 1991. The reforms did away with the License Raj, reduced tariffs and
interest rates and ended many public monopolies, allowing automatic approval of foreign direct
investment in many sectors. Since then, the overall thrust of liberalisation has remained the
same, although no government has tried to take on powerful lobbies such as trade unions and
farmers, on contentious issues such as reforming labour laws and reducing agricultural
subsidies9. By the turn of the 21st century, India had progressed towards a free-market economy,
with a substantial reduction in state control of the economy and increased financial liberalisation.
This has been accompanied by increases in life expectancy, literacy rates and food security,
although urban residents have benefited more than rural residents10.

On 12 November 1991, based on an application from the Government of India, World Bank
sanctioned a structural adjustment loan / credit that consisted of two components - an IBRD loan
of $250 million to be paid over 20 years, and an IDA credit of SDR 183.8 million (equivalent to
$250 million) with 35 years maturity, through India's ministry of finance, with the President of
India as the borrower. The loan was meant primarily to support the government's program of
stabilization and economic reform. This specified deregulation, increased foreign direct
investment, liberalization of the trade regime, reforming domestic interest rates, strengthening
capital markets (stock exchanges), and initiating public enterprise reform (selling off public
enterprises)11.

9
"That old Gandhi magic". The Economist. 27 November 1997. Retrieved 2011-01-17.
10
Task Force Report 2006, pp. 17–20
11
"World bank report P-5678-IN - report of the IBRD and IDA on a proposed structural adjustment loan to India"
(PDF). www.documents.worldbank.org. World bank official website. Retrieved 30 October 2018

12
 BUISNESS ENVIRONMENT

The economic liberalization of India had a multitude of impacts, some of which were positive
and others negative for its people. The foreign investment in the country (including foreign direct
investment, portfolio investment, and investment raised on international capital markets])
increased from a minuscule US$132 million in 1991–92 to $5.3 billion in 1995–96.[43] On the
other hand, it also enabled a number of companies like Enron to invest more easily in India, in
over expensive projects.[44] As per the US Senate, the largest share of foreign direct investment
in India since 1992 came from Enron (more than 10%)12.

However, financial institutions applauded it:

“Its annual growth in GDP per capita accelerated from just 1¼ per cent in the three decades after
Independence to 7½ per cent currently, a rate of growth that will double average income in a
decade.... In service sectors where government regulation has been eased significantly or is less
burdensome—such as communications, insurance, asset management and information
technology—output has grown rapidly, with exports of information technology enabled services
particularly strong. In those infrastructure sectors which have been opened to competition, such
as telecoms and civil aviation, the private sector has proven to be extremely effective and growth
has been phenomenal.”

— OECD13

Election of AB Vajpayee as Prime Minister of India in 1998 and his agenda was seen as a
welcome change by some. His prescription to speed up economic progress included solution of
all outstanding problems with the West (Cold War related) and then opening gates for FDI
investment. In three years, the West was developing a bit of a fascination to India's brainpower,
powered by IT and BPO. By 2004, the West would consider investment in India, should the
conditions permit. By the end of Vajpayee's term as prime minister, a framework for the foreign

12
"118High-Stakes Showdown; Enron's Fight Over Power Plant Reverberates Beyond India" (PDF). New York Times.
20 March 2001. Retrieved 26 November 2018.
13
"Economic survey of India 2007: Policy Brief" (PDF). OECD. Archived from the original (PDF) on 6 June 2011.

13
 BUISNESS ENVIRONMENT

investment had been established. The new incoming government of Dr. Manmohan Singh in
2004 further strengthened the required infrastructure to welcome the FDI.

The fruits of liberalisation reached their peak in 2006, when India recorded its highest GDP
growth rate of 9.6%14. With this, India became the second fastest growing major economy in the
world, next only to China. The growth rate has slowed significantly in the first half of 2012. An
Organization for Economic Co-operation and Development (OECD) report states that the
average growth rate 7.5% will double the average income in a decade, and more reforms would
speed up the pace15. The economy then rebounded to 7.3% growth in 2014–15.

a) Growth rate

A landmark shift in Indian Economy is seen since the adoption of new economic policy in 1991.
This had far reaching impacts on all spheres of life in India. There can be no concrete conclusions
about their impact on Indian people. This turns out to be more of an ideological debate like
capitalism vs Socialism. But there is no doubt in the fact that those reforms were unavoidable and
very compelling. There was in fact, similar wave all across the globe after disintegration of USSR
and end of the Cold War. Many Post-colonial democratic regimes, which were earlier sheltered by
USSR, lost their umbrella. They had no option, but to fall in line to new unipolar world order
dictated by USA. Even China in late 1980’s adopted ‘Open Door Policy’ through which it
liberalized its economy by shedding communist mentality completely. South East Asian
economies also reformed their economy and started engaging more with global economy. These
along with China, pursued export led growth whereas Indian economy still relies almost wholly
on domestic consumption.

14
"The World Factbook". Cia.gov. Retrieved 2013-07-10
15
"Economic survey of India 2007: Policy Brief" (PDF). OECD. Archived from the original (PDF) on 6 June 2011.

14
 BUISNESS ENVIRONMENT

Patterns in the above graph explain inequity of Indian growth story. As per principle of economics,
when a particular sector performs disproportionately higher than average growth rate, economic
wealth starts concentrating into that sector. In this case that sector is Service sector. Within this
sector, highest growth is marked by sectors such as financial services, Real estate services etc.,
which are least employment elastic. Consequently, Growth of past decade was limited to upscale
areas of the countries as almost whole service industry, operates from these areas. Majority of
India got spillover or trickle down growth from here. This accelerated migration to urban areas.
This in turned created array of social problems associated with urbanization. It fundamentally
changed pattern of Indian Society.

Undoubtedly strongest revolution of new century has been one of Information Technology, which
started in last years of past century. This revolution was different because it made globalization
even more obvious and stark. It made possible transfer of real time human labor across nations,
without transfer humans themselves. Further, it erased all boundaries which hinder free flow of
information. This has benefited sharing, nurturing and development of knowledge in societies
which earlier had access only to substandard or non-updated information. As always package is
coupled with some grim realities too.

15
 BUISNESS ENVIRONMENT

GDP growth rate – India’s annual average growth rate from 1990 – 2010 has been 6.6 % which
is almost double than pre reforms era. GDP growth rate surpassed 5% mark in early 1980’s. This
made impact of 1990’s reforms on growth unclear. Some believe that 1980’s reforms were
precursor to LPG reforms. Other things apart, it is clear that 1980 reforms led to crash of economy
in 1991, which was remedied by LPG reforms which were quite more comprehensive. It was IMF
loan which gave government to adjust its economy. It was largest ever loan given by IMF. Initially
there were global doubts on India’s credibility for loan, but India has been so far a disciplined
borrower.

Industrial Growth Rate – Barring few years industrial growth rate has been not much impressive.
Share of Industry still remains stagnantly low at 25%. Worst is that India has transitioned to be a
service led economy, directly from an agrarian one. One expiation of this is end of policy of
imports substitution which derived industrial growth upto 1990. Foreign companies got free access
to Indian markets and made domestic products uncompetitive. They obviously had better access
to technology and larger economies of scale.

India’s position also lagged on account of Research and innovation. Import substitution required
certain degree of investment and efforts in domestic production. It was carried out even when
imports were cheaper. This resulted in good and better capacity building up to that time. This was
coupled with constant technology denial by west, which further pushed government to spend on
R&D. Technology Denial ended with liberalization and globalization. Till that time Indian
Industry was better and modern than that of China. But in two decades China has surpassed India
by huge margin in case of both Industry and innovation.

b) Impact on agriculture

Share of agriculture in domestic economy has declined to about 15%. However, people dependent
upon agriculture are still around 55%. Cropping patterns has undergone a huge change, but impact
of liberalization can’t be properly assessed. We saw under series relating to agriculture that there

16
 BUISNESS ENVIRONMENT

are still all pervasive government controls and interventions starting from production to
distribution.

Global agricultural economy is highly distorted. This is mainly because imbalance in economic
and political power in hands of farmers of developed and developing countries. In developed
countries, commercial and capitalistic agriculture is in place which is owned by influential Agro
corporations. They easily influence policies of WTO and extract a better deal for themselves at
cost of farmers of developing world.

Farming in developing world is subsistence and supports large number of poor people. With
globalization there has been high fluctuation in commodity prices which put them in massive risk.
This is particularly true for cash crops like Cotton and Sugarcane. Recent crises in both crops
indicate towards this conclusively.

On the positive note, India’s largely self-sufficient and high value distinguished products like
Basmati Rice are in high demand all over. Generally speaking, India is better placed to take up
challenge of globalization in this case. If done in sustainable and inclusive manner, it will have a
huge multiplier impact on whole economy. Worldwide implicit compulsion to develop Food
processing Industry is another landmark effect of globalization.

Apart from these, Farm Mechanization i.e. use of electronic/solar pumps, Tractors, combines etc.
all are fruits of globalization. Now moving a step further, Information technology is being
incorporated into agriculture to facilitate farming.

c) Impact on service sector

In this case globalization has been boon for developing countries and bane for developed ones.
Due to historic economic disparity between two groups, human resources have been much cheaper

17
 BUISNESS ENVIRONMENT

in developing economies. This was further facilitated by IT revolution and this all culminated in
exodus of numerous jobs from developed countries to developing countries. Here US have to
jealously guard its jobs as we guard our agriculture.

IT industry

Software, BPO, KPO, LPO industry boom in India has helped India to absorb a big chunk of
demographic dividend, which otherwise could have wasted. Best part is that export of services
result in export of high value. There is almost no material exported which consume some natural
resource. Only thing exported is labor of Professionals, which doesn’t deplete, instead grows with
time. Now India is better placed to become a truly Knowledge Economy.

Exports of these services constitute big part of India’s foreign Exchange earnings. In fact, the only
three years India had Current Account surplus, I.e. 2000-2002, was on back of this export only.

Banking

Further, in banking too India has been a gainer. Since reforms, 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 cut through competition in the
banking industry, and public sector banks are more responsive to customers.

Here too IT is on path of bringing banking revolution. New government schemes like Pradhan
Mantri Jan dhan Yojana aims to achieve their targets by using Adhaar Card. Having said this,
Public Sector Banks still remain major lender in the country.

Similarly Insurance Industry now offers variety of products such as Unit Linked Insurance plans,
Travel Insurance etc. But, in India life Insurance business is still decisively in hands of Life
Insurance Corporation of India.

Stock Markets

18
 BUISNESS ENVIRONMENT

Another major development is one of Stock Markets. Stock Markets are platforms on which
Corporate Securities can be traded real time. It provides mechanisms for constant price discovery,
options for investors to exit from or enter into investment any time. These are back bone of free
markets these days and there is robust trade going all over the world on stock exchanges. Their
Importance can be estimated from the fact that, behavior of stock markets of a country is strongest
indicator of health and future prospects of an economy.

These markets has thrown open wide array of associated services such as Investment Banking,
Asset Management, Underwriting services, Hedging advice etc. These collectively employ lakhs
of people all over India.

Similarly there are commodities market which provides avenues for investment and sale of various
eligible commodities.

Telecom Sector

Conventionally, Telecom sector was a government owned monopoly and consequently service
was quite substandard. After reforms, private telecom sector reached pinnacle of success. And
Indian telecom companies went global. However, corruption and rent seeking marred growth and
outlook of this sector.

Entry of modern Direct to Home services saw improvements in quality of Television services on
one hand and loss of livelihood for numerous local cable operators.

Education and Health Sector

It should be noted that food (Agriculture), Health and education (and to lesser extent banking) are
among basic necessities, which every human being deserves and can’t do without. Unfortunately,
in developing countries there is market failure in all these sectors and majority of people can’t
afford beyond a certain limit (or can’t afford at all). Concept of free markets, globalization,
liberalization etc. fails here miserably. Free markets provide goods and services to people who can
afford paying for them, not to those who deserve and need these.

19
 BUISNESS ENVIRONMENT

Now if we consider these sectors from angle of our inclination towards free markets, certainly
there has been lot of progress. There has been world class education available in India and
Deregulation has resulted in Mushrooming of private engineering and Medical Colleges. But in
reality, this had far reaching devastating effect on society.

These new colleges accommodate only a miniscule proportion of aspirants at very high costs.
Recently, an Independent organization ‘Transparency International’ came out with report claiming
that India’s medical system is most corrupt in the world. This was no surprise, we all know from
where it starts. High fees of education forces many aspirants to take educational loans from banks.
After qualifying job market is unable to absorb majority of them. Practice turns out to be option
of last resort. Now to make a decent living and to pay back the loans person is lured by corruption.
Consequently, when many similar cases are put together, we get a corrupt system, economy and
society.

Reality is that after deregulation and liberalization, government along with other sectors, pulled its
hand from social sectors too. Now there is Mediocre to high quality options are available in private
sector which can be availed as per one’s budget. In public Sector Less than Mediocre to Mediocre
options are available. This leaves huge proportion of aspiring students and expecting patients.

On Social front India’s performance is deplored all over the world and it is probably behind all
important developing economies. This lacuna has been recognized and government has taken the
charge. In case of education almost universal enrollments has been achieved upto primary level
and now impetus should be on improving quality, so that student of public schools comes at par
with at least average private ones.

20
 BUISNESS ENVIRONMENT

CONCLUSION

To summarize, economic liberalization started in 1991 in India of reviving economic policies,

with the goal of creating the economy more market-oriented and increasing the role of private
and foreign investment. Regarding industrial policies, it is apparent from the development of
industrial policy that the governmental role in development has been widespread. The path to be
followed towards industrial development has evolved over time. In early stages, the government
adopted an inward looking development policy which enforced the Indian industry to have low
and inferior technology and throttled the growth of private sector. It disallowed the domestic
industries from severe competition and therefore resulted in low productivity and limited its
ability to expand employment prospects.

The focus on self-reliance and lack of investment in R&D acted as obstacles to technological
development and hence led to the production of inferior quality of goods. There is strong belief
that foreign merchandises are superior to Indian goods is still predominant in Indian society. It is
well established that the condition of the nation after two centuries of exploitation and a
shocking separation must be kept in mind before evaluating the progress of the continual
industrial policy. Many factors like lack of tactical skills, low literacy levels, unskilled labour,
and absence of technology were significant aspects of Indian economy before independence. It is
said that, Industrial plans and policies and their revival has vital role for the economic growth of
any country.

21
 BUISNESS ENVIRONMENT

BIBLIOGRAPHY

1. Websites

a) www.civilserviceindia.com

b) www.insightsonindia.com

c) www.investopedia.com

d) www.jbs.cam.uk

2. Research papers:

a. Implications of Indian Liberalisation by Dr. Paul Kattuman

22