Economic Reforms

Economic Reforms

Meaning: the term economic

reforms broadly indicates necessary

structural adjustments to external
events. It requires reduction in
countrys spending to the level parallel
to its income and thereby reducing its
fiscal deficit considerably.

Need of Economic
Reforms
1)
2)

3)
4)
5)
6)

Increased fiscal deficit

Increased adverse balance of
payment
Gulf crisis
Fall in foreign exchange reserves
Rise in prices
Poor performance of public
sector undertakings

New Economic Policy

New Economic Policy

Liberalization

Privatization

Globalization

Measures adopted for

Liberalization
1)

2)
3)

4)

Abolition of Industrial Licensing &

Registration
Concession from monopolies act
Freedom for expansion & production
to industries
Increase in investment limit to the
small industries

Contd.
5)
6)
7)
8)

Freedom to import capital goods

Freedom to import technology
Free determination of interest rates
Action plan for information
technology & software development

Privatization :- It means allowing

the private sector to set up more and
more of industries that were
previously reserved for public sector.

Objectives of
privatization
1)
2)

3)
4)
5)
6)

To increase the efficiency and

competitive power of the enterprise
To reduce deficit financing and public
deficit
To strengthen industrial management
To earn more & more foreign currency
To make optimum use of economic
resources
To achieve rapid industrial
development of the country

Advantages of
privatization
1)
2)
3)
4)
5)

6)

Reduction in Economic burden

Increase in efficiency
Reduction in sense of irresponsibility
Scientific management
Reduction in political interference
Encouragement of new inventions

Disadvantages of
privatization
1)
2)
3)
4)
5)

6)

Industrial sickness
Lack of social welfare
Class struggle
Increase in inequality
Increase in unemployment
Ignores weaker sections

Measures adopted for

Privatization
1)
2)

3)
4)

5)

Contraction of Public Sector

Disinvestments in existing Public
Sector Industries
Sale of share of Public enterprises
Increase in Private Sector
Investment
Sick industries

Globalization

It means integrating the economy of a

country with the economies of other
countries under conditions of free flow
of trade and capital and movement of
persons across borders.

Features of
Globalization
1)
2)

3)

4)

The business expands throughout the world

Goods and services are bought and sold
from/to any country in the world
The difference between domestic and
foreign markets comes to an end
Products are planned and developed
keeping in minds the markets of entire
world

Contd.
5)

6)

Manufacturing of goods can be made

at any part of the world on the basis
of the feasibility and viability and
from there distribution of goods can
be made in the entire world
Outsourcing of goods and services
can be done

Types/components of
Globalization
Globalization
Of Markets
Of Production

Of Technology
Of Investment

Advantages of
Globalization
1)
2)

3)

4)
5)

Helps in the free flow of capital from

one country to the another
Helps in the flow of technology from
developed countries to the
developing
Helps in boosting the industrialization
Improves the standard of living of
people
Makes available high quality goods at
low prices

Contd.
6)
7)

8)

9)

Increase the welfare & property

throughout the world
Increase the employment
opportunities in developing countries
Helps in reducing the cultural
differences existing in the various
parts of the world
Helps in growth of developing
countries thus promoting balanced
regional development

Disadvantages of
Globalization

1)
2)
3)
4)

5)

It vanishes the domestic business

Causes decline in demand for
domestic products
Widens the gap between rich & poor
The developed countries exploit the
natural resources of the developing
countries
Foreign industries violate the labour
and environmental laws made by govt.
of developing countries

Thank You