Introduction

July, 1991 Restructuring of the Indian economy to improve

the BoP position by New Economic Policy

Licensing Liberalization Nationalization Privatization Inward looking policies Globalization

Liberalization
Liberalization refers to relaxation of government regulations and

restrictions in the economy

Changes pertaining to Industrial licensing

Public sector policy MRTP Act, 1969 Foreign investment Foreign technology agreements.

Outcome :
Greater participation of private entities Reduction in tariffs and taxes Easier movement of goods and services within economy

Impact Of Pre-Liberalization Reforms On Indian Economy

The low annual growth rate of the economy of India before 1980,

which stagnated around 3.5% from 1950s to 1980s, while per capital income averaged 1.3%.At the same time, Pakistan grew by 5%, Indonesia by 9%, Thailand by 9%, South Korea by 10% and in Taiwan by 12%. Only four or five licenses would be given for steel, power and communications. License owners built up huge powerful empires. A huge public sector emerged. State-owned enterprises made large losses. Infrastructure investment was poor because of the public sector monopoly. License Raj established the "irresponsible, self-perpetuating bureaucracy that still exists throughout much of the country" and corruption flourished under this system.

Impact Of Liberalization Reforms On Indian Economy

Total foreign investment (including foreign direct investment, portfolio investment, and investment raised on international capital markets) in India grew from a minuscule US$132 million in 199192 to $5.3 billion in 199596. Cities like NOIDA, Gurgaon,Gaziabad, Bangalore, Hyderabad, Pune, Chennai,Jaipur, Indore and Ahmedabad have risen in prominence and economic importance, become centres of rising industries and destination for foreign investment and firms Annual growth in GDP per capita has accelerated from just 1 per cent in the three decades after Independence to 7 per cent currently, Such rate of growth will double average income in a decade In services sector, output has grown rapidly, with exports of information technology enabled services particularly strong. Private sector has proven to be extremely effective and growth has been phenomenal.

Path to Liberalization - Strengths

Industrial licensing abolished
Increased foreign investment Increase in Forex reserves

Increased consumption and control over price

Check on corruption enhanced quality provided Reduction in dependence on external commercial

borrowings

Liberalization - Challenges
Political Instability
Increase in unemployment Loss of production in domestic units

Increased dependence on foreign manufacturers

Unbalanced development within economy Governance
Need for elimination of large number of Rules & Regulations in the books Sharply reducing the number of implementing agencies Moving towards single window clearance Infrastructure

Financial Liberalization
Capital Account & Financial Liberalisation Impact on Government Budget Impact on Private Economy

Revenue & Expenditure

Private Flows

Official Flows

Domestic Financial Markets

Foreign Multinationals

Access To Credit

Industrial Performance

Privatization
The term Privatization refers to The transfer of ownership of

property or businesses from a government to a privately owned entity.

The transition from a publicly traded and owned company to a

company which is privately owned and no longer trades publicly on a stock exchange. capitalist competition, which its supporters argue will give the public greater choice at a competitive price.

Privatization helps establish a "free market", as well as fostering

Examples in India:
Videsh Sanchar Nigam Limited (VSNL) Hotel Corporation of Limited of India (HCL) Bharat Aluminium Company Limited (BALCO)

Reason for Indian Privatization

Crippling budget deficit Spectacular growth by economies of Korea, Taiwan,

Malaysia in private sector Galloping cost of government intervention, trade & industry and procedural difficulty Collapse of USSR & communist government in eastern Europe Changes in China and gulf crisis IMF and World Bank encouraged capitalism Integration of World trade Development of local capital market and financing institutions

Ways of Privatization
Disinvestment
Deregulation Dereservation

Contracting
Franchising Liquidation Leasing

Impact of privatization
It frees the resources for a more productive utilization Private concerns tend to be profit oriented and transparent in their functioning The system becomes more transparent, all underlying corruptions are minimized Gets rid of employment inconsistencies like free loaders, or over employed departments reducing the strain on resources Reduce the government's financial and administrative burden Minimizes corruption and optimizes output and functions Right size the human resource potential befitting the organization's needs

What is Globalization?
Globalization (or Globalisation) refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import quotas

Strengths of Globalization
Benefits to Market System Commercial gains

Competition
Spread of technical know-how Increase in information flows

Strengths of Globalization
Increased productivity Global sharing of resources Employment Spread of education

Org for environmental and social concerns

Challenges of Globalization
Export poverty Brain drain

Environmental degradation
Food security concerns Diseases

Challenges of Globalization
Drug and illicit goods trade International inequality Trade vs. aid Culture clash Trade liberalization

Impact of Globalization
Favorable impact on the overall growth rate of the

economy(GDP in 1970s was 3% which increased to around 9% in 2010) Greater foreign investment and greater foreign trade has been greater integration of production and markets Across countries (Forex reserves were $ 39 billion (2000-01), $ 107 billion (2003-04), $ 145 billion (2005-06) and $ 180 billion (in February 2007). It is expected that India will cross the $ 200 billion mark soon.

Impact of Globalization
India controls at the present 45 per cent of the global

outsourcing market with an estimated income of $ 50 billion. As per the Forbes list for 2007, the number of billionaires of India has risen to 40 (from 36 last year)more than those of Japan (24), China (17), France (14) and Italy (14) this year. The cumulative FDI inflows from 1991 to September 2006 were Rs.1, 81,566 crores (US $ 43.29 billion). The sector attracting highest FDI inflows are electrical equipments including computer software and electronics (18 percent), service sector (13 per cent), telecommunications (10 per cent), transportation industry (nine per cent), etc.

Indian Economy-Future Challenges

Sustaining the growth momentum and achieving an annual

average growth of 9-10 % in the next five years. Simplifying procedures and relaxing entry barriers for business activities and Providing investor friendly laws and tax system. Checking the growth of population; India is the second highest populated country in the world after China. However in terms of density India exceeds China as India's land area is almost half of China's total land. Due to a high population growth, GNI per capita remains very poor. Boosting agricultural growth through diversification and development of agro processing.

Indian Economy-Future Challenges

Expanding industry fast, by at least 10% per year to integrate not

only the surplus labour in agriculture but also the unprecedented number of women and teenagers joining the labour force every year. Developing world-class infrastructure for sustaining growth in all the sectors of the economy. Allowing foreign investment in more areas Effecting fiscal consolidation and eliminating the revenue deficit through revenue enhancement and expenditure management. Some regard globalization as the spread of western culture and influence at the expense of local culture. Protecting domestic culture is also a challenge.

Thank You