structural changes in the indian economy after liberalisation

Question 1

need for economic reforms

Answer 1

weakness of pre1991 policies
major foreign exchange crisis
conditionalities imposed by IMF and world bank
fall of USSR

Question 2

LIBERALISATION MEANING

Answer 2

policy of deregulation of different segments of the economt

Question 3

features of liberalisation(only 5)

Answer 3

1)delicensing-
before 1991, many industries had to obtain licenses from the government which soon became a hurdle and led to major issues like corruption and created an inefficient environment.
It was thus abolished for most industries except 5
entrepreneurs can now enter any trade or business and do not need a license in most cases, giving a greater role to market forces.
2) relation in controlling monopolies
under the MRTP act or monopolies and restrictive trade practices act, large firms were to seek approval from the government before expansion of production capacity.
restrictions relaxed
focus on regulating monopolistic and restrictive unfair trade practices to protect customers
3) industrial location policy liberalised
no need to obtain permission from government to move business and operate in different smaller cities
4) removal of restrictions on mergers
restrictions on mergers, takeovers removed
5) liberalisation of capital market
capital market made free

Question 4

significance of liberalisation policy

Answer 4

overcome problems of CONTROL RAJ such as ones of uncalled delays and corruption
freedom to entrepreneurs
a spirit of competition and hence efficiency increased

Question 5

meaning of privatisation

Answer 5

the process which leads to transfer of ownership of public sector enterprises from government to private sector

Question 6

rationale of privatisation

Answer 6

check w someone else

Question 7

features of policy of privatisation

Answer 7

POLICY OF DERESERVATION
17 were reserved now 3, namely atomic energy,specified minerals and railways
public sector can enter deserved industries for healthy competition when the need arises
similarly no bar for areas exclusively opened up to the private sector
POLICY TOWARDS SICK PUBLIC UNDERTAKINGS
some underperforming suck PSUs are incurring heavy losses for the economy
so the board for industrial and financial reconstruction (BIFR) was set up to look into revival of them.
35/65 were sanctioned for revival
board for reconstruction of public sector enterprises (BRPSE) set up to advise govt on revial of sick PSUs
POLICY FOR NAVRATNAS and MINIRATNAS
introduced to identify CPSEs(central public sector enterprises) that had the potential to become global giants
gave them autonomy in making managerial decisions to improve efficiency
granted enhanced powers to the board of directors of various profit making CPSEs
NIne enterprises(Navratnas) identified and provided with financial, managerial and operational autonomy to enable them to become global giants and this was done to improve efficiency so they can effectively compete in a global environment. Later the number was raised to 21.
Maharatnas scheme introduced later where mega navratnas empowered to expand operations in domestic and foreign markets.
8 maharantas, 17 navrantas.
Miniratna companies followed and were consistently profit making companies went from 39-73 in number.
have been given addition power and freedom to incure capital expenditure, raise debt and so on
MEMORANDUM OF UNDERTSANDING (MOU)
Main objective is to grant autonomy to the public sector enterprises by reducing quality of control and increasing quality of accountability and management.
aims at bringing a balance between autonomy and accountability
done by setting measurable goals through setting targets both in financed and non financed areas and giving each enterprise greater autonomy to achieve these targets in a competitive environment.
purpose to ensure level playing field between public sectors and private sectors
VOLUNTARY RETIREMENT SCHEME
to reduce excess workers, workers seeking voluntary retirement receive financial compensation.
DISINVESTMENT POLICY
selling off governments equity in the public sector units in the market

Question 8

meaning of globalisation

Answer 8

the process of integrating the economy of a country with other economies of the world through trade, capital flow and technology

Question 9

channels through which globalisation takes place

Answer 9

1- removal of barriers to international trade for free flow of goods and services+ liberalisation in trade of goods and services

2. removal of barriers to international investment+ liberalisation of foreign investment+ open up economy to foreign direct investment+
3. free flow of techonology

Question 10

features of globalisation

Answer 10

EXCHANGE RATE REFORMS
import liberalisation
foreign direct investment 
foreign technology
emergence of IT and BPO sectors
availability of advanced technology
providing employment to skilled manpower
setting up of special economic zones

Question 11

features of globalisation polixy

Answer 11

exhange rate reforms-
change from fixed exchange rate system to market determined flexible exchange ratevsystem

this policy of allowingn exchange rate to be determined in the international market without official intervention is known as convertibility of currency

inport liberalisation
reduced restrictions on foreign trade as a member of WTO
import liberalisation steps-
system of import licensing dismantled
quantitiative restrictions on imports abolished
duties on imports and exports have been reduced to make trade between nations freer

foriegn direct investment
fdi is expected to add to domestic investment and therefore contribute to industrial and economic development of the country
leads to higher efficiency and productivity by increasing competitions and bringing in new technology
make in india- make india global hub for innovation

foreign technology
encourage technological development
free flow of technology allowed
govt provides automatic approval for technological agreements in case of high priority industries