ECONOMIC PLANNING There is no agreement among economists with regard to the meaning of the economic planning.

The term has been used loosely in economic literature. It is often confused between with communism, socialism or economic development. Any type of state intervention in economic affairs has been treated as planning. But the state can intervene even without making any plan. What then is planning? Planning is a technique, a means to an end being the realisation of certain pre-determined and welldefined aims and objectives laid down by central planning authority. The end may be to achieve economic, social, political or military objectives. Therefore, the issue is not between a plan and no plan, it is between different kinds of plans. Some of the definition of economic planning are Professor Robbins defines economic planning as collective control or supersession of private activities of production and exchange. To Hayek, planning means, the direction of productive activity by a central authority. According to Dalton, Economic planning in the widest sense is the deliberate direction by persons incharge of large resources of economic activity towards chosen ends. Even though there is no unanimity of opinion on the subject, yet economic planning as understood by the majority of economists implies deliberate control and direction of the economy by a central authority for the purpose of achieving definite targets and objectives within a specified period of time. Economic planning refers to any directing or planning of economic activity outside the mechanisms of the market, in an attempt to achieve specific economic or social outcomes. Planning is an economic mechanism for resource allocation and decisionmaking in contrast with the market mechanism. Most economies are mixed economies, incorporating elements of market mechanisms and planning for distributing inputs and outputs. The level of centralization of decision-making ultimately depends on the type of planning mechanism employed; as such planning may be based on either centralized or decentralized decision-making. Economic planning is a term used to describe the long term plans of an incumbent government to co-ordinate and develop the economy. Economic planning is commonly a feature of big government as it usually involves increased spending on things such as public work schemes and government programs. Economic planning can apply to production, investment, distribution or all three of these functions. Planning may take the form of directive planning or indicative planning. An economy primarily based on central planning is a planned economy; in a planned economy the allocation of resources is determined by a comprehensive plan of production which specifies output requirements.

THE RATIONALE FOR PLANNING

Till recently economic planning was accepted in India as a development tool on account of various reasons. Of these, the following are the most important: 1. Limitations of the market mechanism. In market economies planning has been adopted for overcoming the limitations of the market mechanism in respect of both efficiency and equity. The need for economic planning in India was felt particularly due to its economic backwardness. Attaining Independence in 1947 the policy makers in this country realized that the path of economic development followed by England, the U.S.A or the Japan was no longer available to it. Relying entirely on market mechanism this country could not even hope to come out of the low level equilibrium trap in which it had fallen during the period of its colonial suppression. 2. The need for social justice. India like many other third world countries had earlier thought that economic growth will automatically solve its poverty problem. However, the experience of the past five and a half decades clearly suggests that in a free enterprise economy gains of economic growth do not necessarily trickle down. In fact market forces operate in such a manner that further concentration of economic power takes place and the growth by passes those very people who deserved to be helped most. It is this reason why in this country need for undertaking poverty alleviation programmes in the overall framework of development planning is felt. Moreover, India will find it increasingly difficult to tackle the unemployment problem if it relies entirely on market forces. Finally, if human resources are to be used fruitfully, India must adopt scientific manpower planning. 3. Resource mobilization and allocation in the context of overall development Programme. India suffers from resource constraints and, therefore, it has to use the available resources thoughtfully. Investment projects in this country should not be chosen entirely on the basis of private profitability. In case that is permitted, large investment will be made into socially low priority areas, such as consumption goods for the rich. In a society where income distribution is highly skewed, competitive markets will dictate a pattern of investment which will not be consistent with the overall long term objectives of the country. In developing countries, the choice of development projects should rest on social benefits rather than private profitability.

THE ELEVENTH FIVE YEAR PLAN

The Eleventh Five Year Plan started on April 1, 2007 and covers the five year period 2007-12. The Eleventh Plan Document started on an optimistic note pointing to the robust economic growth registered in the Tenth Plan which was 7.8 per cent per annum (higher than the rate of growth registered in any other plan). On account of the above reasons the Eleventh Plan Emphasizes faster and more inclusive growth. While the target of economic growth has been kept as high as 9 per cent per annum (higher than the target set in any other plan), this growth must has

yield broad based benefits and ensure equality of opportunity to all. This broad vision of the Eleventh Plan includes several inter-related components: rapid growth that reduces poverty and creates employment opportunities, access to essential services in the health and education especially for the poor equality of the opportunity, empowerment through education and skill development, employment opportunities underpinned by the National Rural Employment Guarantee , environmental sustainability , recognition of women agency and good governance.

Targets and Objectives of the Eleventh Plan

With its strategy of faster and inclusive growth, the Eleventh Plan identifies monitorable targets at the national level of which 13 can be disaggregated at the level of individual States. Justifying the adoption of these highly ambitious targets, the Plan Document States These targets are ambitious but it is better to aim high and fail than to aim low. The 27 monitorable targets at the national level have been divided into 6 main Categories: (1) Income and Poverty, (2) Education, (3) Health, (4) women and Children, (5) Infrastructure, and (6) Environment. 1. Income and Poverty. (i) Average GDP growth rate of 9% per year in the 11th plan period, (ii) Agriculture GDP growth rate 4% per year on an average, (iii) Generation of 58 million new job opportunities, (iv) Reducing of unemployment among the educated to less than 5%, (v) 27% rise in the real wage rate of unskilled workers, and (vi) Reducing in the head count ratio of consumption poverty by 10%. 2. Education. (i) Reducing in the drop-out rate of children at the elementary level from 52.2% in 2002-2003 to 20% by 2011-12, (ii) Developing minimum standard of educational attainment in elementary school, to ensure quality education. (iii) Increasing the literacy rate for person of age seven years or more to 85% by 2011-12, (iv) Reducing the gender gap in literacy to 10% points by 2011-12, and (v) Increasing the percentage of each cohort going to higher education from the present 10% to 15% by 2011-12. 3. Health. (i) Infant mortality rate (IMR) to be reduced to 28 and maternal mortality ratio (MMR) to 1 per 1000 live birth by the of eleventh plan, (ii) Total fertility rate to reduce to 2.1 by the end of eleventh plan, (iii) Clean drinking water to be available for all by 2009, ensuring that there are no slip-backs by the end of eleventh plan. (iv) Malnutrition among children of age group 0-3 to be reduce to half its present level by the end of the eleventh plan, and (v) Anaemia among women and girls to be reduced to half its present level by the end of the eleventh plan

4. Women and children. (i)Sex ratio for age group 0-6 years to be raised to 935 by 2011-12 and 950 by 201617, (ii) Ensuring that at least 33% of direct and indirect beneficiaries of all government schemes are women and girl children, and (iii) Ensuring that all children enjoy a safe childhood, without any compulsion to work. 5. Infrastructure. (i) To ensure electricity connection to all villages and BPL households by 2009 and reliable power the end of the plan, (ii) To ensure all wealth road connection to all habitations with population 1000 and above(500 and above in hilly and tribal areas) by 2009, and all significant habitations by 2015; (iii) To connect every village by telephone and provide broadband connectivity to all villages by 2012: and (iv) To provide homestead sites to all by 2012 and step up the pace of house construction. 6. Environment. (i) To increase forest and trees cover by 5% points: (ii) To attain WHO standards of air quality in all major cities by 2011-12, (iii) To treat all urban waste water by 2011-12 to clean river water, and (iv) To increase efficiency by 20% points by 2016-17.

PUBLIC SECTOR
Public sectors are those enterprises which are directly or indirectly managed by the government, local public bodies and other public agencies. In terms of ownership, public enterprises are those which are owned either wholly by the government or partly, along with private individuals or institutions but nevertheless the government has major share. As a public enterprise it is primarily service-oriented, although the profit aspect is also taken care of. At present, public enterprises have been assigned an important role in the field of industry, trade, transport and agriculture etc. they play a vital role in the development of the economy of a country. Few definitions of public enterprise are as follows: 1. According to S.S Khera, By public enterprise is meant the industrial, commercial and economic activities carried on by the central government or by a state government or jointly by the central and state government. 2. According to A.H.Hanson, Public in a more restricted and familiar sense is to mean state ownership and operation of industrial, agricultural, financial and commercial undertakings. Objectives of Public Sector The objectives of setting public enterprise in India are:

I. To promote rapid economic development through creation and expansion of infrastructure. II. To generate financial resources for development. III. To promote redistribution of income and wealth. IV. To create employment opportunities. V. To promote balanced regional growth. VI. To encourage the development of small scale and ancillary industries, and VII. To promote exports on the one side and import substitution, on the other. Role of Public Sector in the Indian Economy Public sector in India has been criticized strongly by a number of supporters of the private sector who have chosen to shut their eyes towards the achievements of the public sector has played. Following points should be sufficient to convince one that public sector has played a definite positive role in the economy. 1) Public sector and capital formation- The role of public sector in collecting savings and investing them during the planning era has been very important. During the First and Second plans, of the total investment, 54 percent was in the public sector and the remaining in the private sector. The share of public sector rose to 60 per cent in the Third plan but fell thereafter. However, even then it was as high as 45.7 per cent in the Seventh plan. With increasing trends of liberalisation in 1990s, the share of public sector in total investment fell drastically to 34.3 per cent in the Eighth Plan and further to 29.5 per cent in the Ninth Plan. This reflects the increasing importance that is now being accorded to the private sector. The nationalised banks, State Bank of India, Industrial Development Bank of India, Industrial Finance Corporation of India, LIC, UTI etc., have played an important role in collecting savings and mobilisation of resources. 2) Development of infrastructure- The primary condition of economic development in any underdeveloped country is that the infrastructure should develop at a rapid pace. Without a sufficient expansion of irrigation facilities and power and energy, one cannot even conceive of agricultural development. In the same way without an adequate development of transport and communication facilities, fuel and energy, and basic and heavy industries, the process of industrialisation cannot be sustained. In India, the public sector has not only improved the road, rail, air and sea transport system, it has also expanded them manifold. Thus the public sector has enabled the economy to develop a strong infrastructure for future economic growth. The private sector has also benefited immensely from these investments undertaken by the public sector.

3) Strong Industrial Base- Despite several criticisms against the public sector unit, it is admitted fact that rapid industrialisation during the period of planning in India was due to the growth and development of industries in public sector. The industrial revolution in India reserved a number of industries (such as atomic energy, arms and ammunitions etc.) with the public sector in the interest of national security. The state also took the

responsibility of developing key industries, such as coal, iron and steel, mining, aircraft, shipping, fertilisers etc. 4) Economies of scale- In the case of those industries where for technological reasons, the plants have to be large requiring huge investments, setting up of these industries in the public sector can prevent the concentration of economic and industrial and industrial power in private hands. It is a known fact that in the presence of significant economies of scale the free market does not produce the best result. Accordingly consideration of economic efficiency requires some form of government regulation of public ownership. 5) Removal of regional disparities- The government in India has sought to use its power of setting up of industries as a means of removing regional disparities in Industrial development in the pre-independence period most of the industrial progress of the country was limited in and around the port towns Mumbai, Calcutta and Chennai. Other part of the country lagged far behind. After the initiation of the planning process in the country in 1951, the government paid particular attention to the problem and set up industries in the number areas neglected by the private sector. Thus, a major proportion of public sector investment was directed towards backward states. Private sector or private enterprise refers to all types of individual or corporate enterprises, domestic and foreign, in any field of corporate enterprises are characterised by ownership and management in private hands, personal initiative and profit motive. In the 18th and 19th centuries, private sector units were of a Laissez faire variety i.e. the private sector was completely free of state interference. Private enterprises were normally small units, owned and managed by individual proprietors and partnerships and only in a minority of cases they were public limited companies. They had only one motive: to earn as high a profit as possible. PRIVATE SECTOR Private sector or private enterprise refers to all types of individual or corporate enterprises, domestic and foreign, in any field of corporate enterprises are characterised by ownership and management in private hands, personal initiative and profit motive. In the 18th and 19th centuries, private sector units were of a Laissez faire variety i.e. the private sector was completely free of state interference. Private enterprises were normally small units, owned and managed by individual proprietors and partnerships and only in a minority of cases they were public limited companies. They had only one motive: to earn as high a profit as possible. Role of the Private Sector in India Even before Independence, the private sector was responsible for the setting up and expansion of such industries as cotton and jute, textile, sugar, paper, edible oils, etc.

from the beginning of this century, the Tatas were in the fore-front of the iron steel industry. Protection given by the government during the 1930s and the second world war (1939-1945) stimulate industrial development. But the greatest stimulant was given to industrialisation by the national government after independence. The private sector was given sufficient scope to produce intermediate goods and machines also, and as consequence of whole range of industries producing chemicals, paints, plastics, machines-tools, ferrous and non-ferrous metals, rubber, etc. have come up. India has become self-sufficient in many consumer goods. The private has become so capable as to help other third world country in their economic development. Private sector and agriculture- The dominant sector in India in agriculture which consists of agriculture proper and other allied activities such as dairying animal husbandry, poultry etc. The sector which is completely managed by private enterprises contributes nearly 32% of domestic GNP and provides employment to nearly 67% of the working population. From this point of view, it may be thought that the private sector is dominant in the case of agriculture and allied occupation. But, in practical agriculture is not run on a commercial base and much of it is in the hand of small and marginal farmers. Accordingly, the size and the extent of the private sector in agriculture does not show characteristics of concentration and monopoly power as are found in the corporate sector. Private Sector in trading- Trading, both wholesale and retail, has always been in the private sector because the trading services can be best rendered by private businessmen. The government is least suited to render these services. However, conditions of scarcity, the private businessmen have the tendency to resort to hoarding and exploitation of the consumer. The Government has attempted to control and regulate private trade through controls on price, on the movement of goods between regions, on storage etc. In 1973, the Government of India decided to take over the wholesale trade in wheat, but the scheme fell through. Private Sector and small-scale and cottage industries- Small and cottage industries in India are in the private sector and they have an important role to play in industrial development. They are particularly suited for the utilisation of local employment opportunities, as they are labour intensive. Besides, they ensure a more equitable distribution of income and wealth and help in the effective mobilisation of human and physical capital. Problems of the Private Sector 1. Profit generation is the main motive. Industrialists in the private sector operate with the sole motive of maximising profits. Consequently, they are interested in investing only in those industrial sectors where quick profit generation is possible. Therefore, they tend to invest in consumer goods industries and ignore investments that are crucial for building up proper industrial infrastructures. Since lack of infrastructure and capital goods industrials plagued the Indians economy after Independence, while private sector was reluctant to invest in these areas, the public sector had to reluctant to invest in these areas, the public sector had step in.

Thus, a number of economists allege that in the initial phase of industrial developments lasting for about three decades, the private sector was not willing to shoulder the responsible of a prime mover of economic development processes. 2. Focus on consumer durables sectors. Even in the consumer goods sector, the focus of the private sector is on the elite consumer groups since it is these groups that have ample purchasing power. Thus, the production pattern is skewed in the favour of the relatively small richer sections of the society. As a result, while production of elite consumer durable goods like consumer electronics and automobiles is encouraged, the production of mass consumption goods is neglected. Some economists allege that this implies the wastage of the economic surplus of the country on unnecessary industrials activities while the core economic activities suffer. This leads to, what they call, distortions in production structure. 3. Monopoly and concentration. It is the general pattern of capitalist development that, as the economy progresses, the monopoly organisations are strengthened and concentration of wealth and economic power in a few hands increases. This has happened in India also. In the pre-Independence India, this was encouraged by the managing agency system. After Independence, with the initiation of economic planning in the country, it was expected that this tendency would be effectively controlled. However, this was not to be. These tendencies have been future strengthened by the substantial liberalisation of industrial policy in the last two decades which has enabled the large business houses to amass considerable wealth with the result that concentration of economic power has further increased. 4. Declining share of net value added in total output. Net value added is defined as the amount generated over and above the cost of raw materials which go to the over and above the cost of raw materials which go to the production system after allowing for the depreciation charges. It thus, indicates the efficiency of the production process. Many industries in the private sector have reported a fall in the share of net value added in output in a number of years. 5. Industrials disputes. As compared to public sector enterprise, the Private sector companies suffer from more industrial disputes. Difference and conflicts between the owners and employees regarding wages, bonus, retrenchment and other issues frequency emerge. Although there is a provision for the Committees, Arbitration Boards, etc. For settlements of industrials disputes, the employers have better bargaining strength .Taking advantages of this; they often refuse to accede even the genuine demand of workers and the conflicts assume the shape of long drawn out struggles.

MONEY MARKET
A money market may be defined as the market for lending or borrowing of short-term funds. It is the market where the short-term surplus investible funds of banks and other financial institutions are demanded by borrowers comprising individual

companies and the Government. Commercial banks are both suppliers of funds in the money market and borrowers. The Indian money market consists of two parts: the unorganised and the organised sector. The unorganised sector consists of indigenous bankers who pursue the banking business on traditional lines and non-banking financial institution (NBFCs). The organised sector comprises the Reserve Bank, the State Bank of India and its associate banks, the 20 nationalised banks and other private sector banks, both Indian and foreign. Characteristics of Indian money market 1. Lack of integration. As already stated, the Indian money market is divided into two sectors, viz. the unorganised sector, and the organized sector. As the two sectors are completely separate from each other, their financial operations are quite independent, and whatever goes on in one sector has little effect on the other. There is more of competition than cooperation and coordination between various components of The Indian money market. For example, co-operative banks compete with the commercial banks, particularly in the countryside. Commercial banks not only compete among themselves but also with the foreign banks. To make the matters worse, the indigenous bankers have absolutely no connections with the RBI. 2. Lack of rational interest rates structure. For a long time a major defect of the Indian money markets has been lack of rational interest rates structure in it. This was particularly due to lack of adequate co-ordination between different banking institutions. Lately situation has some what improved due to the authority of the RBI. Further, standardisation of interest rates has also introduced some rationality in the structure of interest rates. 3. Absence of an organized bill market. Through both inland and foreign bills are being purchased as well as discounted by the commercial bankers, it cannot be said that an organized bill markets exits in the country. Only a limited bill markets that has been created by the RBI under its schemes of 1952 and 1970 now exits but it has failed to popularise bill finance in this country. 4. Shortage of funds in the money market. The Indian money market is characterised by shortage of funds. Invariably demands for loanable funds in the money markets far exceed its supply. This is attributed to variety of factors. In the first placed, savings are small due to low per capita income. Because of widespread poverty a vast multitude of population has virtually no ability to save. Those of the people who have the ability to save often indulge in wasteful consumption. Secondly, inadequate banking facilities, lack of banking habit among the people and absence of ample and diversified investment opportunities has also contributed in the past to shortage of funds. 5. Inadequate banking facilities. Though lately commercial bankers have been opened their branches on an unprecedented scale, banking facilities in the country are still inadequate. The coverage of the rural sectors by the modern banks leaves much scope for further development. Compared to the U.S.A where per1, 200 persons there is a branch of a commercial bank, in India, we have a branch on an average for roughly 15,900 persons. This difference is probably due to the difference in the level of development in two countries.

CAPITAL MARKET
Capital market is the market for long-term funds, just as the money market for the short term funds. It refers to all facilities and the institutional arrangements for borrowing and lending term funds (medium-term and long-term funds). It does not deal in capital goods but it concerned with the raising of money capital for purpose of investment. The demand for long-term money capital comes pre-dominantly from the private sector manufacturing industries and agriculture and from the government largely for the purpose of economic development. As the central and state governments are investing not only on economic overheads as transport, irrigation and power development but also on basic industries and some times even on consumer goods industries, they require substantial sums from the capital market. The supply of funds for the capital market comes largely from individual savers, corporate savings, banks, insurance companies, specialised financing agencies and the government.

FOREIGN DIRECT INVESTMENT

Foreign Direct Investment is any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor. FDIs require a business relationship between a parent company and its foreign subsidiary FDI stocks now constituting 28% of the global GDP. Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. FDIs do not provide a foreign capital and funds, but also provides domestic countries with an exchange of skill sets, information and expertise, job opportunities and improved productivity levels. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period.

SEZ
A Special Economic Zone in short SEZ is a geographically bound zone where the economic laws in matters related to export and import are more broadminded and liberal as compared to rest parts of the country. SEZs are projected as duty free area for the purpose of trade, operations, duty and tariffs. SEZ units are self-contained and integrated having their own infrastructure and support services. Within SEZs, units may be set-up for the manufacture of goods and other activities including processing, assembling, trading, repairing, reconditioning, making of gold/silver, platinum jewellery etc. As per law, SEZ units are deemed to be outside the customs territory of India. Goods and services coming into SEZs from the domestic tariff area or DTA are treated as exports from India and goods and services rendered from the SEZ to the DTA are treated as imports into India. The category 'SEZ' covers a broad range of more specific zone types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial parks or Industrial Estates (IE),Free Ports,

Urban Enterprise Zones and others. The goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC).

GLOBALIZATION
The term globalization refers to the integration of economies of the world through uninhibited trade and financial flows, as also through mutual exchange of technology and knowledge. Ideally, it also contains free inter-country movement of labor. In context to India, this implies opening up the economy to foreign direct investment by providing facilities to foreign companies to invest in different fields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India, allowing Indian companies to enter into foreign collaborations and also encouraging them to set up joint ventures abroad; carrying out massive import liberalization programs by switching over from quantitative restrictions to tariffs and import duties, therefore globalization has been identified with the policy reforms of 1991 in India. The term globalisation has four parameters: (i) Reduction of trade barriers so as to permit free flow of goods across national frontiers; (ii) creation of an environment in which free flow of capital can take place among nation: (iii) creation of environment permitting free flow of technology: and (iv) last, but not the least from point of view of developing countries, creation of an environment in which free movement of labour can take place in different countries of the world. India has followed the policy of globalisation for over a decade. The impact of these policies on our economy is as follows: 1. Indian share in world export of goods and services. According to the data provided by the World Bank, Indias Share in world exports rose from 0.54% in 1990 to 0.67% in 1999. Where as the world exports rose about 64% during the 1990 to 1999(i.e. from $3,328 billion dollar in 1990 to $5,442 billion), Indian export rose by 103% during the same period (i.e. from $17.97 billion in 1990 to $36.56 billion in 1999). 2. Foreign investment flows in India. Another major claimed benefit of globalisation is that it should leap to a greater inflow of foreign investment which should help to increase the productive capacity of the economy. Foreign investment takes two forms- Foreign direct investment (FDI) and Foreign portfolio investment (FPI). Foreign direct investment helps to increase the productive capacity of the economy, while foreign portfolio investment of a more speculative nature and thus is very volatile. During 1990-91 and 199495, the share of FDI was only 24.2 and that of FPI was as high as 75.8%. The total average inflow of foreign investment during the six year period (1995-96 to 2000-01) was $4.85 billion which just half targeted by the government of order of $10 billion. 3. Gap between foreign Investments approved and Actual inflows. There is a wide gap between the level of investment approved and actual flows. There is no doubt that some time-lag between the approvals and actual inflows of investment is inevitable. In the initial years of economic reforms, this was

understandable. This explains the fact that during 1991-95, actual inflow of investment was only 21.3% of total approved investment. However, the situation started improving thereafter and during the five-year period, 1996 to 2000, actual inflow of investment was 40.8% of total approved investment. So far as foreign investment is concerned, there is still a wide gap between promise and realisation which need to be bridged. 4. Increase of imports far greater than exports. Globalisers advocated the acceptance of the new strategy on the plea that India will be able to access foreign markets more effectively. It would be of interest to examine this claim. Exports, as the barometer of access to foreign market indicated that they rose from 7.3% of GDP in 1991-92 to 9.1% of GDP in 1995-96. Thereafter, they experienced a gradual decline, till they were 8.4% of GDP in 1999-2000. However, they have touched a record of 9.8% in 2000-01. But if we examine the trend of imports it becomes obvious that they increase from 8.3% of GDP in 1991-92 to 12.3% of GDP in 1995-96. Even thereafter, when exports fell in 1996-97 and 1997-98, imports continued a forward march. This indicated the hard reality that foreigners have been able to penetrate into the Indian market much more effectively than Indians been able to foreign markets. LIBERALIZATION Economic 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. It refers to loosening or removal of controls so that economic development gets encouragement. It includes abolition of those economic policies, rules, regulations, administrative controls and procedures which impede economic development. In other words economic liberalisation is a new economic policy of promoting market determined economic decisions rather than bureaucratic arbitrary economic decisions. Liberalisation contains two components. -Allow the private sector to run those activities which were restricted earlier only to public sector. -Relaxation of rules and regulations which were restricted to the growth of private sector. Thus, Liberalization refers to a relaxation of previous government restrictions, usually in areas of social or economic policy. Most often, the term is used to refer to economic liberalization, especially trade liberalization or capital market liberalization. Although economic liberalization is often associated with privatization, the two can be quite separate processes. For example, the European Union has liberalized gas and electricity markets, instituting a system of competition; but some of the leading European energy companies (such as EDF and Vattenfall) remain partially or completely in government ownership.