Highlights of LPG Policy & Objectives Unveiled
Liberalization, privatization, and globalization model's key components, objectives, and implications for economies worldwide. Dive into the principles of LPG to understand their significance in promoting economic growth and international trade."
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Presentation Transcript
LPG MODEL Highlights of the LPG Policy Foreign Technology Agreements Foreign Investment MRTP Act, 1969 (Amended) Industrial Licensing Deregulation Beginning Opportunities for overseas trade Steps to regulate inflation Tax reforms Abolition of License -Permit Raj of privatisation
LPG MODEL Meaning of Liberalization It implies greater autonomy to the business enterprises in decision-making and removal of government interference.
LPG MODEL Objectives of Liberalization To boost competition between domestic businesses To promote foreign trade and regulate imports and exports Improvement of technology and foreign capital To reduce the debt burden of a country To unlock the economic potential of the country by encouraging the private sector and multinational corporations to invest and expand.
LPG MODEL Meaning of Privatization Privatisation refers to the participation of private entities in businesses and services and transfer of ownership from the public sector (or government) to the private sector as well
LPG MODEL Objectives of Privatisation Providing strong momentum to the inflow of FDI Privatisation aims at providing a strong base to the inflow of FDI. Increased inflow of FDI improves the financial strength of the economy
LPG MODEL Meaning of Globalization: Globalization essentially means integration of the national economy with the world economy. It implies a free flow of information, ideas, technology, goods and services, capital and even people across different countries and societies.
LPG MODEL Objectives of Globalization To make the world a common market of trade To help the developing countries to match up with the growth and innovations in developed economies To unite the nations and enhance mobility of labour, capital, raw materials and entrepreneurs.
LPG MODEL FACTORS RESPONSIBLE FOR LPG REFORMS: Rise in Prices: The inflation rate increased from 6.7% to 16.7% due to rapid increase in money supply and the country s economic position became worse. Rise in Fiscal Deficit: Due to increase in non-development expenditure fiscal deficit of the government increased. Due to rise in fiscal deficit there was a rise in public debt and interest. In 1991 interest liability became 36.4% of total government expenditure. Increase in Adverse Balance of Payments: In 1980-81 it was Rs. 2214 crore and rose in 1990- 91 to Rs. 17,367 crores. To cover this deficit large amount of foreign loans had to be obtained and the interest payment got increased. Iraq War: In 1990-91, war in Iraq broke, which led to a rise in petrol prices. The flow of foreign currency from Gulf countries stopped and this further aggravated the problem. Dismal Performance of PSUs: These were not performing well due to political interference and became big liability for government. Fall in Foreign Exchange Reserves: India s foreign exchange reserve fell to low ebb in 1990-91 and it was insufficient to pay for an import bill for 2 weeks.
LPG MODEL INTERNATIONAL EVENTS ASSOCIATED WITH INDIAN REFORMS: The Soviet Union was collapsing at the time, proving that more socialism could not be the solution for India s ills. Deng Xiaoping had revolutionized China with market-friendly reforms. 1990-91 Iraq war led to the stoppage of flow of foreign currency from Gulf countries. To tide over the Balance of Payment (BoP) issues, India borrowed huge amount from International Monetary Fund (IMF). The Asian financial crisis of 1997-99 laid India low. The dot-com collapse and global recession of 2001, and the huge global uncertainty created in the run-up to the invasion of Iraq in 2003. The global boom of 2003-08 spearheaded by China.
LPG MODEL BIRD S OVERVIEW: Abolition of Industrial licensing/ Permit Raj Public sector role diluted MRTP limit goes Beginning of privatization Free entry to foreign investment and technology Industrial location policy liberalized Abolition of phased manufacturing programmes for new projects Removal of mandatory convertibility cause Reduction in import tariffs Deregulation of markets Reduction of taxes
LPG MODEL THANK YOU
