1. N
SOU
SUB
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2. CONTENTS
 introduction
 Reasons for implementing LPG
 Liberalization
 Privatization
 Globalization
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3. Introduction
July 1991,India has taken a series of measures to structure
the economy and improve the BOP position. The new
economic policy introduced changes in several areas.
The policy have salient feature which are: -
1.Liberlisation (internal and external)
2.Extending Privatization
3.Globalisation of the economy
Which are known as “LPG”. (libearlisation privatisation
globalisation)
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4. Reasons for implementing LPG
 Excess of consumption and expenditure over
revenue resulting in heavy govt. borrowings.
 Growing inefficiency on the use of resources.
 Over protection to industries.
 Mismanagement of the firm and the economy.
 Increase in losses for public sector enterprises.
 Various distortion like poor technological
development, shortage of foreign exchange and
borrowing from abroad.
 Low foreign exchange reserves.
 Inflation
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5. Liberalization
Liberalization is a very broad term that usually refers to
fewer government regulations and restrictions in the
economy in exchange for greater participation of
private entities
Liberalization refers to the relaxation of the previous
government restriction usually in area of social and
economic policies. When government liberalized
trade , it means it has removed the tariff ,subsidies
and other restriction on the flow of goods and
services between the countries.
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6. The Path of liberalization
 Relief for foreign investors
 Devaluation of Indian rupees
 New industrial Policy
 New trade policy
 Removal of import Restrictions
 Liberalization of NRI remittances
 Freedom to import technology
 Encouraging foreign tie-ups
 MRTP relaxation
 Privatization of public sector
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7. Advantages of liberalization
 Industrial licensing
 Increase the foreign investment.
 Increase the foreign exchange reserve.
 Increase in consumption and Control over price.
 Check on corruption.
 Reduction in dependence on external commercial
borrowings
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8. Disadvantages of
Liberalization
 Increase in unemployment.
 Loss to domestic units.
 Increase dependence on foreign nations
 Unbalanced development
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9. Examples
Name of Enterprises Situation
1.National Thermal Power Corporation Profit
2.Indian Oil Corporation Profit
3.Mananegar Telephone Nigam Limited Profit
4.Steel Authority India Limited Profit
5.Bharat Petroleum Corporation Limited Profit
6.Hindusthan Petroleum Corporation Profit
Limited
7.Bharat Heavy Electronics Limited Profit
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10. Privatization
Privatization means transfer of ownership and/or management of
an enterprise from the public sector to the private sector .It
also means the withdrawal of the state from an industry or
sector partially or fully.
Privatization is opening up of an industry that has been reserved
for public sector to the private sector.
Privatization means replacing government monopolies with the
competitive pressures of the marketplace to encourage
efficiency, quality and innovation in the delivery of goods and
services.
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11. Different Ways in privatization
 Liberalization Approach
 Relative Share Enlargement Approach
 Association of Private Sector
Management Approach
 Transfer of Minority Equity Ownership
Approach
 Transfer of Complete Ownership
Approach
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12. Advantages of Privatization
 Privatization helps to reduce the burden on Govt.
 It will help profit making public sector unit to modernize and
diversify their business.
 It will help in making public sector unit more competitive.
 It will help to improving the quality of decision
making, because the decisions are free from any political
interference.
 Privatization may help in reviving sick units which are the
liability of the public sector.
 It Encourage the new innovations without any restrictions.
 Industrial growth.
 Increase the foreign investment.
 Increase in efficiency.
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13. Disadvantages of Privatization
 Industrial sickness.
 Lack of welfare.
 Class struggle.
 Increase in inequality
 Opposition by employees.
 Problem of financing.
 Increase in unemployment.
 Ignores the weaker sections.
 Ignores the national importance
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14. Examples of privatization in India
 Lagan Jute Machinery Company Limited
(LJMC)
 Videsh Sanchar Nigam Limited (VSNL)
 Hindustan Zinc Limited (HZL)
 Hotel Corporation Limited of India (HCL)
 Bharat Aluminum Company limited
(BALCO)
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15. Globalization
Globalization implies integration of the economy of the country
with the rest of the world economy and opening up of the
economy for foreign direct investment by liberalizing the
rules and regulations and by creating favorable socio-
economic and political climate for global business.
According to IMF: -”The growing economic interdependence of
countries worldwide through increasing volume and variety
of cross border transaction in goods and services and of
international capital cash flows, and through the more rapid
and widespread diffusion of technology.”
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16. Features of Globalization
 Opening and planning to expand business throughout the world.
 Erasing the difference between domestic market and foreign market.
 Buying and selling goods and services from/to any countries in the
world.
 Locating the production and other physical facilities on a consideration
of the global business dynamics ,irrespective of national consideration.
 Basing product development and production planning on the global
market consideration.
 Global sourcing of factor of production i.e. raw-
material, components,machinery,technology,finance etc. are obtained
from the best source anywhere in the world.
 Global orientation of organizational structure .and management
culture
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17. Foreign market entry strategies
 Exporting
 Licensing/Franchising
 Contract manufacturing
 Management contract
 Assembly operations
 Fully owned manufacturing facilities
 Joint venturing
 Merger and acquisition
 Strategic alliance
 Countertrade
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18. Pros and Cons of Globalisation
Globalization have several benefits ,these are: -
 Free flow of capital and increase in the total capital employed.
 Free flow of technology.
 Increase in industrialization.
 Spread of production facilities throughout the globe.
 Balanced development of world economies.
 Increase in production and consumption.
 Commodities at lower price with high quality.
 Increase in jobs and income.
 Higher Standard of living.
 Balanced human development
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19. Negative effects of Globalization
 Loss of domestic industries
 Exploits Human resource
 Decline in income
 Unemployment
 Transfer of natural resources
 Lead to commercial and political colonism
 Widening gap between rich and poor
 Dominance of foreign institutions
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