INTRODUCTION

India's post-independence development strategy showed all

the signs of stagnation, but the economy started showing the
sign of recovery in the early nineties when the government
adopted the new economic model known as Liberalization,
Privatization and Globalization (LPG) to meet a grave
economic crisis; characterized by unprecedented adverse
balance of payment problem, inflation, decline in the foreign
exchange reserve and the Gross Domestic Product (GDP)
growth rate. The objective of the economic reforms adopted
by the Indian Government was to transform a backward and
predominantly agrarian economy, lacking in basic
infrastructure, into a modern developed economy. New
Economic Policy 1991 India opened up the economy in the
early nineties following a major crisis that led by a foreign
exchange crunch that dragged the economy close to
defaulting on loans. The credibility of country's economy
reached the sinking level and no country was willing to
advance or lend to India at any cost. The country ran out of
foreign exchange reserves. To face the crisis situation, the
government decided to bring about major economic reforms
to revive Indian economy. These reforms were popularly
known as 'structural adjustments' or 'liberalization' or
'globalization'. The government announced a New Economic
Policy on July 24, 1991. The new policy deregulates industrial
economy in a substantial manner.
OBJECTIVES
1. Utilizing fully the indigenous capabilities of entrepreneurs.
2. Fostering research and development efforts for the
development of indigenous technologies.
3. Raising investments.
4. Improvement in efficiency and productivity.
5. Controlling monopolistic power.
6. Assigning the right areas for the public sector
undertakings.
7. Ensuring welfare as also skills and facilities to the workers
to enable them to face new technologies
8. Retaining the capacity to earn our own foreign exchange
through exports.
9. To achieve self-reliance
CONCEPT OF LIBRALIZATION
Liberalization is understood to be the situation of the political
economy where the means of production will be in the hands
of the market and the economic efficiency is measured in
terms of market-defined objectives. Major economic
activities are opened for private participation keeping only
key issues of welfare and other regulatory mechanism with
the state. This opening up of various sectors for private
participation and allowing them to manage the businesses
for maximizing the profits will clearly underline the freedom
available for the market to have their own labour
participation practices and deployment of human resources.
Liberalisation thus aims minimizing the labour participation
and downsizing the workforce in the industry in the name of
removing the dead wood to maximize efficiency.
POSITIVE IMPACTS
1. Liberalization was reinforced by the conclusion of the
Uruguay round of multi-lateral trade negotiation in 1994 and
the establishment of WTO.
2. The expansion of regional integration efforts also
stimulates the trend towards liberalization.
3. Liberalization policies have significantly widened the
effective economic space available to producers and
investors. Notes www.iasscore.in Indian Economy .
4. Producers and investors behave as if the world economy
consisted of a single market and production platforms with
regional or national sub-sections rather than as a set of
national economies linked by trade and investment flows.
5. However, liberalization is also endangered by the rise of
national protectionism and the use of economic sanctions by
the leading economic powers.
NEGATIVE IMPACTS
The economic reforms of the 1990s swept away the
oppressive licensing controls on industry and foreign trade,
allowed the market to determine the exchange rate,
drastically reduced protective customs tariffs, opened up to
foreign investment, modernised the stock markets, freed
interest rates, strengthened the banking system and began
privatisation of public enterprises.
Airline, telecom, TV broadcast and insurance were opened
for private players. The consequences have been far-
reaching. First, the opening up of foreign trade and
investment (and a competitive exchange rate) boosted
exports, services and inward remittances enormously; today
they account for 20 per cent of the GDP compared to 10 per
cent in 1990.
Flourishing external commerce and rising foreign investment
dethroned the baleful deity of "foreign exchange scarcity",
which had justified four decades of dreadful economic policy
and draconian, corruption-spawning controls. Today's open
economy is more productive and more resilient to shocks like
high oil prices.
With over $140 billion of forex reserves, strong exports and
low external debt, the recent surge in global oil prices has not
derailed the economy's forward momentum.
CONCEPT OF PRIVATISATION
Privatization is a process that reduces the involvement of the
state or the public sector in the economic activities.
Privatization implies many on the government sectors are
sold or given to private individual hands to run them.
Privatization is frequently associated with industrial or
service-oriented enterprises, such as mining, manufacturing
or power generation, but it can also apply to any asset, such
as land, roads, or even rights to water. In recent years,
government services such as health, sanitation, and
education have been particularly targeted for privatization in
many countries." In recent years, privatization has been
suggested as a measure to cure problems related to the
public sector such as mounting losses, low profitability, and
underutilization of capacity, etc. There has been rising
interest in privatization process in the developing countries in
the recent past.
Privatization is an essentially effective tool for restructuring
and reforming the public sector enterprises running without
significant aim and mission as private sector is perceived to
be fundamentally more self motivated, prolific and reliable
for superior quality of products and services.
POSITIVE IMPACTS
1. Microeconomic Advantages
a. State owned enterprises usually are outdone by the
private enterprises competitively. When compared the latter
show better results in terms of revenues and efficiency and
productivity. Hence, privatization can provide the necessary
impetus to the underperforming PSUs.
b. Privatization brings about radical structural changes
providing momentum in the competitive sectors. c.
Privatization leads to adoption of the global best practices
along with management and motivation of the best human
talent to foster sustainable competitive advantage and
improvised management of resources.
2. Macroeconomic Advantages
a. Privatization has a positive impact on the financial health
of the sector which was previously state dominated by way
of reducing the deficits and debts.
b. The net transfer to the State owned Enterprises is lowered
through privatization.
c. Helps in escalating the performance benchmarks of the
industry in general. d. it can initially have an undesirable
impact on the employees but gradually in the long term, shall
prove beneficial for the growth and prosperity of the
employees. e. Privatized enterprises provide better and
prompt services to the customers and help in improving the
overall infrastructure of the country.
NEGATIVE IMPACTS
Privatization in spite of the numerous benefits it provides to
the state owned enterprises, there is the other side to it as
well. Here are the prominent disadvantages of privatization:
1. Private sector focuses more on profit maximization and
less on social objectives unlike public sector that initiates
socially viable adjustments in case of emergencies and
criticalities.
2. There is lack of transparency in private sector and
stakeholders do not get the complete information about the
functionality of the enterprise.
3. Privatization has provided the unnecessary support to the
corruption and illegitimate ways of accomplishments of
licenses and business deals amongst the government and
private bidders. Lobbying and bribery are the common issues
tarnishing the practical applicability of privatization.
4. Privatization loses the mission with which the enterprise
was established and profit maximization agenda encourages
malpractices like production of lower quality products,
elevating the hidden indirect costs, price escalation etc.
5. Privatization results in high employee turnover and a lot of
investment is required to train the lesserqualified staff and
even making the existing manpower of PSU abreast with the
latest business practices.
CONCEPT OF GLOBALISATION
Broadly speaking, the term 'globalization' means integration
of economies and societies through cross country flows of
information, ideas, technologies, goods, services, capital,
finance and people. Cross border integration can have
several dimensions - cultural, social, political and economic.
The Policies and developments in many countries including
India are influenced by the globalization. Globalization is not
only a movement of ideas, information, capitals, people,
technologies, goods and services, and labour across the
nation-states but has serious implications on socio-economic
and political sphere of life. Limiting ourselves to economic
integration only, one can see the three channels of
globalization
(a) trade in goods and services,
(b) movement of capital and
(c) flow of finance and
(d) movement of people. The globalization through
economic integration has been presented as the best, natural
and universal path towards development of mankind
(e) The integration of the national economy with that of the
global economy.
(f) The conversation of a national market into an
international one, which facilitates the international mobility
of factors like production or commodities.
POSITIVE IMPACTS
1. Multilateral agreements in trade, taking on such new
agendas as environmental and social conditions.
2. New multilateral agreements for services ,Intellectual
properties, communications, and more binding on national
governments than any previous agreements.
3. Market economic policies spreading around the world,
with greater privatization and liberalization than in earlier
decades.
4. Growing global markets in services. People can now
execute trade services globally -- from medical advice to
software writing to data processing , that could never really
be traded before.
5. Physical and geographical boundaries are crumbling and
the world is becoming a global village. Nation states today no
longer have to play market-making role, so wool, wine,
perfumes can belong to any market anywhere in the world.
6. With nation states and nationalities disappearing,
ethnicities and national loyalties are fading out. Customers
are only concerned about the products quality, price, design,
value and appeal.
NEGATIVE IMPACTS
1. Adverse Impact on Autonomy of State Globalization is also
known to constrain the authority and autonomy of the state.
Free trade limits the ability of states to set policy and protect
domestic companies. Capital mobility makes generous
welfare states less competitive; global problems exceed the
grasp of any individual state; and global norms and
institutions become more powerful.
2.Adverse Impact on Culture Globalization leads to cultural
homogeneity: and diminish difference; global norms, ideas or
practices overtake local mores. Many cultural flows, such as
the provision of news, reflect exclusively western interests
and control; and the cultural imperialism of the United States
leads to the global spread of American symbols
3. Change in Structure of Trade India's share in trade of
agriculture products with developed countries has declined.
These countries are getting many subsidies by WTO. On the
other hand, developing countries are rejected on the bans of
sanitary and phytosanitary consideration. Bankruptcy of
many Employment Generating Firms Globalization has
rendered many companies and their operations redundant.
So either they are closed, wholly or partly, or are hived off or
their ancillary units are declared sick.
CONCLUSION
The present endeavor is an effort to find out civil society's
responses to foreign direct investment particularly in Indian
context. The study explores the role and reactions of
nongovernmental organizations vis-a-vis multinational
companies. When state is rolling back, under liberalisation,
NGO's have to fulfill the gap between state and individual. In
a developing country like India, there are numerous gaps left
by the government in the development sector, sometimes
deliberately and sometimes because of lack of funds and
awareness. These are the gaps that many NGOs are trying to
fill in modern India. They have come up to work in areas like
education, healthcare, rescue and relief operations in natural
calamities, where the government's effort had proved
inadequate. The relationship between state and market in
21st century is m great debate. The effectiveness of the state
and market in economic intervention depends on the nature
of the state and the structure o.f market. Since their
inception, state has always tried to intervene in market. Till
World--War II, state and market were rival to each other. But
in the era of globalization, the role of the state as producer
and distributor of resources has diminished. Its role as
regulator has been increased. Further, liberalization and
privatization has reduced the welfare activities of the state.