Privatisation

Liberalisation, privatisation, and globalisation are three components of LPG. India adopted LPG in 1991 after the International Monetary Fund asked the Indian government to comply with some global financial regulations to avail foreign funds for development. Consequently, the Indian government launched its New Economic Policy, or NEP, in response to the IMF’s recommendations. Privatisation is the transfer of publicly owned property to private ownership. A wide range of actions was taken under this policy. Structural reforms and stabilisation measures were the two primary requirements of this policy.

Privatisation

Privatisation measures are aimed at increasing the role of the private sector while decreasing the government’s control. Apart from that, actions were taken to turn government-owned businesses into private-sector firms. The government lessened its influence over the public sector enterprises through disinvesting. A strategic sale, a partial sale, and token privatisation are the three types of privatisation. 

For the strategic sale or denationalisation process, the government must hand over 100 per cent ownership of public enterprises to private company owners.

In the partial sale or partial privatisation, the government holds at least 50% shares of the company. As a result, they would control the majority of the stock and the company’s autonomy and operations. Additionally, the disinvestment might generate revenue for the government as well. It has also been suggested that after privatisation, the public sector’s efficiency will naturally improve, resulting in higher-quality goods and services for customers.

Liberalisation

The goal of liberalisation was to ease the processes that hindered economic activities. For this, the government was supposed to simplify some of the rules and regulations governing the economic activity in the country. It aimed at enhancing international commerce through imports and exports. It opened the gates of the Indian market for foreign capital and technology. This approach was also supposed to broaden the country’s market for its exports.

Globalisation

It refers to the process of integrating a country’s economy into the global economy. The major focus of globalisation is on overseas commerce and private and institutional foreign investment. 

The phrase “globalisation” refers to a complicated phenomenon. The fundamental goal is to use a variety of strategic measures to ensure global integration. Globalisation aims to establish a borderless world in which a country’s needs may be met from all around the world, resulting in a single global economy.

Industrial Development–What can a new industrial policy do?

Industrial growth is critical to any economy’s success. It generates jobs, encourages research and innovation, promotes modernisation, and eventually leads to economic self-sufficiency. Indeed, industrial progress benefits other areas of the economy, such as agriculture (new farming technology) and services. It is also intertwined with the growth of trade.

However, India’s manufacturing sector was in dire straits shortly after independence. It contributed just approximately 11.8 per cent of the country’s GDP. The output and productivity were both at a minimum. We were also technologically behind the times. Cotton and jute were the only two well-established industries. As a result, it became evident that we needed to place a greater focus on industrial growth and diversifying our industrial sector’s industries. As a result, our industrial strategies were developed by the government.

1956 Resolution on Industrial Policy

The industrial policy resolution was implemented during the second five-year plan. The goal was to bring more private finance into the business but in a methodical way. As a result of this decision, industries were divided into three groups, as shown below.

• The first category includes industries that are solely controlled by the government.

• Second: Industries for which the private sector could be able to supply supplemental services. These sectors would remain mostly under the control of the government. In addition, only the government has the authority to establish new industries.

• The third category includes the remaining industries that were transferred to the private sector.

While any private corporation or person might create a third-category sector, it was not that easy. Through licences and permits, the state kept control over these businesses. Every new industry required a licence and a slew of other approvals from the relevant government. Even to grow the current industry, they required approvals and permits.

The goal of such an industrial policy was to maintain a close eye on product quality. It was also a key instrument for promoting regional equity, i.e., ensuring that industries in economically depressed areas were promoted.

Conclusion

The primary goal of privatisation was to attract foreign direct investment (FDI) into India. An investment in the form of controlling ownership in a firm in one nation by a company established in another country is known as a foreign direct investment (FDI). To be more specific, globalisation has benefited professionals and talented persons, mostly from metropolitan areas. Liberalisation in a country is the easing of government control and the allowing of private sector enterprises to operate without or with fewer limitations, as well as the government allowing private players to develop for the country’s progress.