Liberalisation

Liberalisation began in the middle of severe economic instability in 1991. It brought economic growth and efficiency. Liberalisation is an economic term that defines government relaxations. It refers to the reduction of restrictions on trade and capital. Liberalisation is implemented to loosen the controls and interferences of the government. The main objective behind this is the economic development of the country.

In India, liberalisation began in 1991. The term or the country meant to make the Indian markets more service-oriented and marketable. It was introduced to expand private and foreign investments and introduce a free market. It affected the areas including export-import, technology, fiscal policies, foreign investments, licensing, etc. 

Liberalisation of Insurance Industry In India

Liberalisation provides autonomy and self-decision making to the industry. Thereby reducing the government regulations and restrictions. As liberalisation began in India, reforms in the insurance sector began to take place. The main objective was to make the industry more dynamic. The reforms were introduced to capture the large population under Insurance Industry. 

The industry became well versed in the terms of Foreign Direct Investments. Foreign Direct Investments shall give the much-needed capital to the Insurance Sector which has contributed to the long term economic development of the sector. An increase in FDI shall increase the foreign investments which shall, in turn, contribute to the overall economic development of the country.

For the liberalisation of the Insurance Industry In India, the Malhotra committee was formed. It was recommended that competitive and effective changes are required in the Insurance Sector. They advised that the time was ripe to dispense the state monopoly of the Insurance sector and let private enterprises enter. They had the following reasons for the reform.

1. The competition brought forward by the liberalisation shall improve the customer service and price of insurance products.
2. They reasoned that competition existed in mutual funds, banking, non-banking financial institutions. Then exposure of the insurance sector to such competition was genuine.
3. The state-owned insurance companies were strong enough to face the competition introduced by private companies.

Impact of Post Liberalisation on the Insurance Market

Soon after the liberalisation, the sector has been rapidly changing. The insurance sector has witnessed tremendous growth. The companies have contributed to the spread of insurance in rural areas. As IRDA was introduced in 2000, the insurance market was opened for the private sector with limited exposure to foreign equity.  Today India has 13 life insurance companies and 8 general insurance companies under private ownership. 

The effects of liberalisation on the small Scale Insurance Sector have been that the Foreign Direct Investments have helped the industry to achieve break-even sooner. It has helped them to monetize better.

Effects of Liberalisation on Industrial Policy

The 1991 Industrial policy had the liberalisation drive made in the country. The policy has undergone several changes ever since. The changes in the industrial regulations include the following.

• Abolition of MRTP Act
• Public Sector Policy
• Deregulation of Industrial Sector
• Industrial Delicensing
• Foreign Investment Policy

The Effect of Liberalisation on the Indian economy due to changes in Industrial policy includes the abolition of red-tapism. The Industrial Policy of 1991 had reduced the licensing regulations. 

Conclusion

With Liberalisation, India has witnessed economic developments which are still growing. The public sector role refinement welcomes various private companies to previously reserved sectors for private companies. Foreign Investments were welcomed through liberalisation. 

The Industrial Policies have brought comprehensive reforms which worked as a favor for the economic development of the country. The reforms brought various companies like Pepsi, Sony, Samsung, Microsoft, HP to the Indian market. Consequently, the job opportunities and development started paddling their way.