Liberalisation, Privatisation and Globalisation Mind Map

ЁЯПл MP BoardClass 11Economics
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Liberalisation, Privatisation and Globalisation (LPG) - An Appraisal

  • Introduction (The 1991 Crisis)

    • Economic Crisis of 1991
      • High fiscal deficit
      • Depleting foreign exchange reserves
      • Rising inflation
      • Balance of Payments (BoP) crisis
    • Response: New Economic Policy (NEP) announced in July 1991

  • Liberalisation

    • Meaning: Removal of unnecessary controls and restrictions
    • Objectives: Unlock economic potential and increase market competitiveness
    • Sectors of Reform
      • Industrial Sector Reforms
        • Abolition of industrial licensing (except a few)
        • Contraction of public sector domain
        • Decontrol of prices and production
      • Financial Sector Reforms
        • Role of RBI changed from regulator to facilitator
        • Entry of private sector banks (Indian and foreign)
        • Rise in limit of Foreign Institutional Investment (FII)
      • Tax and Fiscal Reforms
        • Reduction in corporate and indirect taxes
        • Simplification of tax procedures
      • Foreign Exchange Reforms
        • Devaluation of the rupee
        • Market-determination of exchange rates
      • Trade and Investment Policy Reforms
        • Removal of quantitative restrictions on imports
        • Reduction in import tariffs
        • Elimination of export duties

  • Privatisation

    • Meaning: Transfer of ownership/management from public sector to private sector
    • Methods
      • Outright sale of public sector companies
      • Withdrawal of government from ownership and management
    • Key Mechanisms
      • Disinvestment: Sale of a part of equity of PSUs to the public
      • Granting Navratna, Maharatna, and Miniratna status to efficient PSUs for operational autonomy

  • Globalisation

    • Meaning: Integration of the economy of the country with the world economy
    • Key Dimensions
      • Creation of global networks and economic interdependence
      • Free flow of goods, services, capital, and technology
    • Policy Strategies
      • Outsourcing (e.g., BPO in India)
      • World Trade Organisation (WTO) establishment (1995) for rule-based global trade

  • Indian Economy During Reforms: An Appraisal (Pros & Cons)

    • Positive Impacts
      • High growth rate of GDP (Shift towards service sector)
      • Inflow of Foreign Direct Investment (FDI) and foreign exchange reserves
      • Control over inflation
      • Access to global goods and technologies
    • Adverse Impacts (Criticisms)
      • Neglect of Agriculture: Public investment and subsidies reduced
      • Jobless Growth: Industrial growth not generating enough employment
      • Inequential Growth: Widening income gap between rich and poor, and states
      • Spread of consumerism and cultural impact

  • Conclusion & Way Forward

    • Reforms brought India out of the 1991 crisis
    • Need for inclusive growth and focus on social infrastructure (health and education)