New economic Reforms-Liberalization, Privatization and Globalization, rationale and need for reforms

Privatization/”>Impacts of Privatization

Privatization in generic terms refers to the process of transfer of ownership, can be of both permanent or long term lease in nature, of a once upon a time state-owned or public owned property to individuals or groups that intend to utilize it for private benefits and run the entity with the aim of profit maximization.
ADVANTAGES OF PRIVATIZATION
Privatization indeed is beneficial for the Growth and sustainability of the state-owned enterprises.
• State owned enterprises usually are outdone by the private enterprises competitively. When compared the latter show better results in terms of revenues and efficiency and productivity. Hence, privatization can provide the necessary impetus to the underperforming PSUs .
• Privatization brings about radical structural changes providing momentum in the competitive sectors .
• Privatization leads to adoption of the global best practices along with management and motivation of the best human talent to foster sustainable competitive advantage and improvised management of Resources.
• Privatization has a positive impact on the financial Health of the sector which was previously state dominated by way of reducing the deficits and debts .
• The net transfer to the State owned Enterprises is lowered through privatization .
• Helps in escalating the performance benchmarks of the Industry in general .
• Can initially have an undesirable impact on the employees but gradually in the long term, shall prove beneficial for the growth and prosperity of the employees .
• Privatized enterprises provide better and prompt Services to the customers and help in improving the overall Infrastructure-2/”>INFRASTRUCTURE of the country.

DISADVANTAGES OF PRIVATIZATION
Privatization in spite of the numerous benefits it provides to the state owned enterprises, there is the other side to it as well. Here are the prominent disadvantages of privatization:
• Private sector focuses more on profit maximization and less on social objectives unlike public sector that initiates socially viable adjustments in case of emergencies and criticalities .
• There is lack of transparency in private sector and stakeholders do not get the complete information about the functionality of the enterprise .
• Privatization has provided the unnecessary support to the Corruption and illegitimate ways of accomplishments of licenses and business deals
ADVANTAGES AND DISADVANTAGES OF PRIVATISATION IN INDIA

Privatization loses the mission with which the enterprise was established and profit maximization agenda encourages malpractices like production of lower quality products, elevating the hidden indirect costs, price escalation etc..
• Privatization results in high employee turnover and a lot of Investment is required to train the lesser-qualified staff and even making the existing manpower of PSU abreast with the latest business practices .
• There can be a conflict of interest amongst stakeholders and the management of the buyer private company and initial resistance to change can hamper the performance of the enterprise .
• Privatization escalates price Inflation in general as privatized enterprises do not enjoy government subsidies after the deal and the burden of this inflation effects common man

Impacts of Globalisation:-

Definition of Globalization/”>Globalization-3/”>Globalization :- Its a process(not an outcome) characterized by increasing global Interconnections by gradual removal of barriers to trade and investment between nation and higher economic efficiency through competitiveness.

Various economic, political, social and cultural effects of globalization are as follows:-

Economic:-

Breaking down of national economic barriers
International spread of Trade, Financial and productive activities
Growing power of transnational cooperation and International financial Institutions(WTO, IMF)Through the process of:-

1- Liberalization-2/”>Liberalization– relaxation of restrictions, reduction in role of state in economic activities,decline in role of govt in key industries, social and infrastructural sector.

2- Privatization- Public offering of Shares and private sale of shares, entry of private sector in public sector and sale of govt enterprises.

3- FDI

4- International regulatory bodies(WTO,IMF)

5- MNC’s

6- Infrastructural development

7- Expansion of Communication-technology/”>Information and communication technology and birth of information age.

8- Outsourcing of services- ie BPO and Call Centres.

9- Trade related Intellectual Property Rights(TRIPS)- product based patent rather than process based.

Social effects:-

Withdrawal of National govt from social sectors ie declining share of govt in public spending, reducing social benefits for worker(social dumping,pension cuts,subsidies reduction)
Labor reforms and deteriorating Labor welfare:-
- Labour Market deregulation:-
  - Minimum wage fixing
  - EMPLOYMENT security
  - Modifying tax regulation
  - Relaxed standards of security
- Increased Mechanization demands skilled labour and thus loss of job for unskilled labour
- Loss of jobs for traditional workers for example bihar silk workers due to imported Chinese- Korean silk
Feminism of Labour ie increased Women participation specially in soft industries
Trickle down theory of POVERTY reduction has limited success and in agricultural nations poverty has infect increased.
Unsustainable development practices such as:- excessive use of Fertilizers, Irrigation, fish trawling by mnc’s(Protein flight ),Exploitation of Natural Resources by MNC’s.
Migration and Urbanization have lead to problem of slums
Commercialization of indigenous knowledge:- patenting
Rising inequality in wealth concentration

Cultural:-

Increased pace of cultural penetration
Globalization of culture
Development of hybrid culture
Resurgence of cultural nationalism ie shivsena opposing valentine day

Political:-

Globalization of National Policies- Influenced by International agencies
Reducing economic role of govt
Political lobbying

Positive effects of Globalization

Increased competition
Employment generation
Investment and capital flow
Foreign Trade
Spread of technical know how
Spread of Education
Legal and ethical effects
Improved status of women in the Society
Urbanization
agriculture:- greater efficiency,productivity, use of HYV seeds, Future contracts and Cooperative Farming
Higher standard of living

Economic Reforms are changes to the way an economy is managed. They can be implemented for a variety of reasons, such as to improve economic efficiency, increase growth, or reduce poverty.

There are many different types of economic reforms, but some of the most common include:

Liberalization: This involves reducing government intervention in the economy. This can be done by deregulating markets, privatizing state-owned enterprises, and lowering trade barriers.
Privatization: This involves transferring ownership of state-owned enterprises to the private sector. This can be done through public offerings, auctions, or management buyouts.
Globalization: This involves increasing economic integration between countries. This can be done through trade, investment, and financial flows.

Economic reforms can have a significant impact on an economy. They can lead to increased economic growth, higher levels of efficiency, and reduced poverty. However, they can also have negative consequences, such as job losses and increased inequality.

The decision of whether or not to implement economic reforms is a complex one. It is important to weigh the potential benefits and costs of reforms before making a decision.

Table of Contents

Liberalization

Liberalization is the process of removing government restrictions on the economy. This can include deregulation, trade liberalization, and financial liberalization.

Deregulation is the process of reducing or eliminating government regulations on businesses. This can be done by repealing laws, changing regulations, or simply not enforcing existing regulations.

Trade liberalization is the process of reducing or eliminating tariffs and other trade barriers. This can be done through bilateral agreements, regional trade agreements, or multilateral agreements such as the World Trade Organization (WTO).

Financial liberalization is the process of reducing or eliminating government restrictions on the financial sector. This can include deregulation of banks, securities markets, and insurance companies.

Privatization

Privatization is the process of transferring ownership of state-owned enterprises to the private sector. This can be done through public offerings, auctions, or management buyouts.

Public offerings are the sale of shares in a state-owned enterprise to the public. This can be done through an initial public offering (IPO) or a secondary offering.

Auctions are the sale of state-owned enterprises to the highest bidder. This can be done through a sealed-bid auction or an open-bid auction.

Management buyouts are the purchase of a state-owned enterprise by its management team. This can be done with or without the approval of the government.

Globalization

Globalization is the process of increasing economic integration between countries. This can be done through trade, investment, and financial flows.

Trade is the exchange of goods and services between countries. This can be done through exports, imports, and Foreign Direct Investment (FDI).

Investment is the purchase of assets in another country. This can be done through portfolio investment or direct investment.

Financial flows are the movement of Money between countries. This can be done through Foreign Exchange markets, bank lending, and securities markets.

Rationale and need for reforms

The rationale for economic reforms is to improve economic efficiency and growth. Reforms can help to reduce government intervention in the economy, increase competition, and attract foreign investment.

The need for economic reforms can arise from a variety of factors, such as economic stagnation, high inflation, or a Balance of Payments crisis. Reforms can help to address these problems and improve the country’s economic performance.

Impact of reforms

The decision of whether or not to implement economic reforms is a complex one. It is important to weigh the potential benefits and costs of reforms before making a decision.

What are the three pillars of economic reforms?

The three pillars of economic reforms are liberalization, privatization, and globalization.

Liberalization refers to the removal of government controls on the economy. This includes deregulation, which is the removal of government regulations on businesses, and trade liberalization, which is the removal of government restrictions on international trade.
Privatization refers to the sale of state-owned enterprises to private investors. This is intended to improve efficiency and reduce government debt.
Globalization refers to the integration of the world economy through trade, investment, and financial flows. This is intended to promote economic growth and development.

What was the rationale for Economic Reforms In India?

The rationale for economic reforms in India was to improve economic growth and development. The Indian economy was growing at a slow pace in the 1970s and 1980s, and there was a need to make the economy more efficient and competitive. The reforms were also intended to reduce poverty and improve the standard of living of the Indian people.

What were the achievements of economic reforms in India?

The achievements of economic reforms in India have been significant. The economy has grown at a much faster pace since the reforms were implemented, and poverty has been reduced significantly. The reforms have also made the Indian economy more efficient and competitive.

What were the challenges of economic reforms in India?

The challenges of economic reforms in India have been significant. The reforms have led to some economic inequality, and there have been protests against the reforms. The reforms have also been criticized for not doing enough to improve the lives of the poor.

What is the future of economic reforms in India?

The future of economic reforms in India is uncertain. The reforms have been successful in many ways, but they have also faced challenges. It is unclear whether the reforms will continue in the future, or whether they will be reversed.

Question 1

The New Economic Reforms were introduced in India in the year:

(A) 1991
(B) 1992
(C) 1993
(D) 1994

Answer
(A) 1991

Question 2

The main objective of the New Economic Reforms was to:

(A) Increase economic growth
(B) Reduce poverty
(C) Increase employment
(D) All of the above

Answer
(D) All of the above

Question 3

The New Economic Reforms were based on the following principles:

(A) Liberalization
(B) Privatization
(C) Globalization
(D) All of the above

Answer
(D) All of the above

Question 4

Liberalization refers to:

(A) The removal of government controls on the economy
(B) The privatization of state-owned enterprises
(C) The opening up of the economy to foreign investment
(D) All of the above

Answer
(A) The removal of government controls on the economy

Question 5

Privatization refers to:

(A) The sale of state-owned enterprises to private investors
(B) The transfer of ownership of state-owned enterprises to the private sector
(C) The closure of state-owned enterprises
(D) All of the above

Answer
(A) The sale of state-owned enterprises to private investors

Question 6

Globalization refers to:

(A) The integration of the world economy
(B) The increasing interconnectedness of the world’s economies
(C) The increasing flow of goods, services, capital, and people across national borders
(D) All of the above

Answer
(D) All of the above

Question 7

The New Economic Reforms have had a positive impact on the Indian economy. Which of the following is not a positive impact of the New Economic Reforms?

(A) Increased economic growth
(B) Reduced poverty
(C) Increased employment
(D) Increased inequality

Answer
(D) Increased inequality

Question 8

The New Economic Reforms have also had some negative impacts on the Indian economy. Which of the following is not a negative impact of the New Economic Reforms?

(A) Increased Unemployment
(B) Increased Environmental Degradation
(C) Increased corruption
(D) Increased inequality

Answer
(D) Increased inequality

Question 9

Overall, the New Economic Reforms have had a positive impact on the Indian economy. However, there are some negative impacts that need to be addressed. Which of the following is the most important thing that needs to be done to address the negative impacts of the New Economic Reforms?

(A) Increase investment in education and healthcare
(B) Reduce corruption
(C) Increase social safety nets
(D) All of the above

Answer
(D) All of the above