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Effects Of Liberalization On The Indian Economy Lesson-3 Presented By: Roman Saini
In This Lesson Economic Reforms Capital Market Reforms Foreign Investment Privatization Globalization
Economic Reforms Capital Market Reforms . Initiation of recommendations of the Narasimham Committee report which were aimed at removing direct government control and replacing it with a regulatory framework based on transparency and disclosure supervised by an independent regulator The Securities and Exchange Board of India (SEBI) was established in 1988. It gota legal status in 1992 on the basis of recommendations of the Narasimham Committee report. . SEBI has been given substantial powers under the SEBI Act 1992 to regulate the activities of various players in the capital market.
Economic Reforms .In the Union Budget 1991-92, number of reform proposals were announced relating to financial sector, SEBI, stock exchanges, mutual funds, public sector and foreign investments. Creditors Rating Agencies were established in order to assess the financial health of different financial institutions and agencies related to the stock market activities. Investment norms for NRIs liberalized, so that NRIs and overseas corporate bodies can buy shares and debentures with prior permission of RBI.
Economic Reforms Foreign Investment .Foreign investment would bring the advantages of technology transfer, marketing expertise, introduction of modern managerial techniques and new possibilities for promotion of exports. .In 1991, the government announced a specified list of high technology and high-investment priority industries wherein automatic permission was granted for foreign direct investment (FDI) up to 51 percent foreign equity. .The limit was raised to 74 percent and subsequently to 100 percent for many of these industries. Moreover, many new industries have been added to the list over the years.
Economic Reforms Foreign Investment .The foreign direct investment is now permitted through automatic route and hence the Government welcomed foreign investment for country's industrial growth .Foreign Investment Promotion Board (FIPB) has been set up to negotiate with international firms and approve direct foreign investment in select areas. . Various steps were undertaken taken from time to time to promote foreigrn institutional investment (FIl) in India. The Government has encouraged foreign trading companies to assist Indian exports in export activities. .
Economic Reforms Privatization Privatisation is transfer of ownership from the public to private sector or management of a government owned enterprise . .Privatisation of the public sector enterprises by selling off part of the equity of PSEs to the public is known as disinvestment. The purpose of the sale was mainly to improve financial discipline and facilitate modernisation. . It was also envisaged that private capital and managerial capabilities could be effectively utilised to improve the performance of the PSUs.
Economic Reforms The privatisation could provide strong impetus to the inflow of FDI Attempts have been made to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions. .For instance, some PSUs have been granted special status as maharatnas, navratnas and miniratnas. The granting of status resulted in better performance of these companies
Economic Reforms Globalization It is an outcome of the set of various policies that are aimed at transforming the world towards greater interdependence and integration. . It is the free movement of goods, services and people across the world ina seamless and integrated manner and it is the extension and integration of cross-border international trade, investment and culture. . .Globalisation attempts to establish links in such a way that the happenings in India can be influenced by events happening miles away. It is turning the world into one whole or creating a borderless world. Because of globalisation, many Indian companies have expanded their operations to many other countries.
Economic Reforms .Outsourcing is one of the important outcomes of the globalisation process. It is the practice of handing over control of public services to private enterprise. Outsourcing occurs when a business pays an outside supplier to provide goods and services, instead of doing the work in-house. . Most multinational corporations, and even small companies, are outsourcing their services to India because of cheaper cost with reasonable degree of skill and accuracy .The low wage rates and availability of skilled manpower in India have made it a destination for global outsourcing in the post-reform period.