Liberalization

In general, liberalization (or liberalisation) refers to a relaxation of previous government restrictions, usually in such areas of social and economic policy. In some contexts this process or concept is often, but not always, referred to as deregulation.Liberalization of autocratic regimes may precede democratization (or not, as in the case of the Prague Spring. In the arena of social policy it may refer to a relaxation of laws restricting for example divorce, abortion, or drugs In the arena of civil rights policy it may refer to the elimination of laws prohibiting same-sex sexual relations, same-sex marriage, interracial marriage, or interfaith marriage Most often, the term is used to refer to economic liberalization, especially trade liberalization or capital market liberalization. Although economic liberalization is often associated with privatization, the two can be quite separate processes. For example, the European Union has liberalized gas and electricity markets, instituting a system of competition; but some of the leading European energy companies (such

as EDF and Vattenfall) remain partially or completely in government ownership. Liberalized and privatized public services may be dominated by just a few big companies particularly in sectors with high capital costs, or high such as water, gas and electricity. In some cases they may remain legal monopoly at least for some part of the market (e.g. small consumers). Liberalization is one of three focal points (the others being privatization and stabilization) of the Washington Consensus's trinity strategy for economies in transition. An example of Liberalization is the "Washington Consensus" which was a set of policies created and used by Argentina There is also a concept of hybrid liberalisation as, for instance, in Ghana where cocoa crop can be sold to a variety of competing private companies, but there is a minimum price for which it can be sold and all exports are controlled by the state.

Globalization
globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Put in simple terms, globalization refers to processes that increase world-wide exchanges of national and cultural resources. Advances

in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities.] Though several scholars place the origins of globalization in modern times, others trace its history long before the European age of discovery and voyages to the New World. Some even trace the origins to the third millennium BCE. In the late 19th century and early 20th century the connectedness of the world's economies and cultures grew very quickly. This slowed down from the 1910s onward due to the World Wars and the Cold War [6] but has picked up again since neoliberal policies began in the 1980s and especially since the Post Cold War era started in the early 1990s. The term globalization has been in increasing use since the mid-1980s and especially since the mid1990s.] In 2000, the International Monetary Fund (IMF) identified four basic aspects of

globalization: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge.[9] Further, environmental challenges such as climate change, cross-boundary water and air pollution, and over-fishing of the ocean are linked with globalization.Globalizing processes affect and are affected

by business and work organization, economics, socio-cultural resources, and the natural environment.

Overview[
Humans have interacted over long distances for thousands of years. The overland Silk Road that connected Asia, Africa, and Europe is a good example of the transformative power of translocal exchange that existed in the "Old World". Philosophy, religion, language, the arts, and other aspects of culture spread and mixed as nations exchanged products and ideas. In the 15th and 16th centuries, Europeans made important discoveries in their exploration of the oceans, including the start of transatlantic travel to the "New World" of the Americas. Global movement of people, goods, and ideas expanded significantly in the following centuries. Early in the 19th century, the development of new forms of transportation (such as the steamship and railroads) and telecommunications that

"compressed" time and space allowed for increasingly rapid rates of global interchange. [11] In the 20th century, road vehicles, intermodal transport, and airlines made transportation even faster.

OBJECTIVES OF GLOBALIZATION

Meeting the research challenge of global change and globalization requires understanding the new causal links, relationships, processes, and players. Doing so is impossible without creating new links between the different scientific disciplines that engage with the goal of global sustainability. While the general objective is to foster these links across the University, the specific focus of this project is to prepare for an research cluster by

developing a comprehensive understanding of the co-joint processes of global change and globalization and their actors in a way that transcends the limitation of disciplinary boundaries, identifying the pathways presented by a globalized world for managing adaptation and identifying the fundamental impediments that prevent global society from harnessing the full potential of globalization for addressing the problems of global change and developing new integrated concepts and methods that will help overcome those fundamental impediments and reap the benefits of striking an optimal balance between mitigation and adaptation.

Privatization
Privatization, also spelled privatisation, may have several meanings. Primarily, it is the process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector (a government) to the private sector, either to a business that operate for a profit or to a non-profit organization. It may also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management.[1] Privatization has also been used to describe two unrelated transactions. The first is the buying of all outstanding shares of a publicly traded company by a single entity, taking the company private. This is often described as private equity. The second is a demutualization of a mutual

organization or cooperative to form a joint stock company.

Forms of privatization
There are four main methods[of privatization: 1. Share issue privatization (SIP) - selling shares on the stock market 2. Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction or by using the Treuhand model 3. Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price. 4. Privatization from below - Start-up of new private businesses in formerly socialist countries. Choice of sale method is influenced by the capital market, political, and firm-specific factors. SIPs are more likely to be used when capital markets are less developed and there is lower income inequality. Share issues can broaden and deepen domestic capital markets, boosting liquidity and

(potentially) economic growth, but if the capital markets are insufficiently developed it may be difficult to find enough buyers, and transaction costs (e.g. underpricing required) may be higher. For this reason, many governments elect for listings in the more developed and liquid markets, for example Euronext, and the London, New York and Hong Kong stock exchanges. As a result of higher political and currency risk deterring foreign investors, asset sales occur more commonly in developing countries. Voucher privatization has mainly occurred in the transition economies of Central and Eastern Europe, such as Russia, Poland, the Czech Republic, and Slovakia. Additionally, Privatization from below is/has been an important type of economic growth in transition economies.

A substantial benefit of share or asset-sale privatizations is that bidders compete to offer the highest price, creating income for the state in addition to tax revenues. Voucher privatizations, on the other hand, could be a genuine transfer of assets to the general population, creating a real sense of participation and inclusion. If the transfer of vouchers is permitted, a market in vouchers could be created, with companies offering to pay money for them.

Secured borrowing
Some privatization transactions can be interpreted as a form of a secured loan and are criticized as a "particularly noxious form of governmental debt". In this interpretation, the upfront payment from the privatization sale corresponds to the principal amount of the loan, while the proceeds from the underlying asset correspond to secured interest payments the transaction can be considered substantively the same as a secured loan, though it is structured as a sale. This interpretation is particularly argued to apply to recent municipal transactions in the United States, particularly for fixed term, such as the 2008 sale of the proceeds from Chicago parking meters for 75 years. It is argued that this is motivated by "politicians' desires to borrow money surreptitiously", due to legal restrictions on and political resistance to alternative sources of revenue, viz, raising taxes or issuing

OBJECTIVES OF PRIVATIZATION
The emphasis is on improving the efficiency of all Parastatal enterprises, whether retained or divested. The Government has decided to distance itself from direct involvement in business, and thus to divest most of its interests whether in loss making or in profit making Parastatal enterprises. All commercial Parastatal enterprises will become available for both foreign and local participation using suitable methods of divestiture including liquidation where necessary. Primary Objectives: The following are the primary objectives which have been defined in the Governments policy statement on Parastatal Sector Reform: Improve the operational efficiency of enterprises that are currently in the Parastatal sector, and their contribution to the national economy; Reduce the burden of Parastatal enterprises on the Government budget; Expand the role of the private sector in the economy, permitting the Government to concentrate public resources on its role as provider of basic public services, including health, education and social infrastructure; and Encourage wider participation by the people in the ownership and management of business.

In pursuing these primary objectives the CHC aims to: Transform, through comercialisation, restructuring and divestiture, the performance of most significant enterprises in the Parastatal Sector; and

Ensure liquidation of all non-viable Parastatal enterprises as soon as possible.

Secondary Objectives: In so far as their pursuit is consistent with the primary objectives, the CHC intends to ensure that divestiture meets the following secondary objectives: to create a more market-oriented economy; to secure enhanced assess to foreign markets, to capital and to technology; to promote the development of the capital market; and to preserve the goal of self-reliance.

Likewise the process of comercialisation and restructuring will be designed so as to ensure that those Parastatals that remain for the time being in the public sector: are responsive to markets, cost-conscious and profit oriented; act as business entities without being required to carry out non commercial; activities except when explicitly compensated by Government; do not encounter political interference in their operations including the banks; are guided by supervisory agencies to the minimum consistent with pursuit of consumers interests; have boards and managements that are autonomous and accountable; and have effective performance monitoring systems.

LPG IN INDIA

The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG or Liberalization, Privatization and Globalization model. The primary objective of this model was to make the economy of the seventh largest country in the world the fastest developing economy in the globe with capabilities that help it match up with the biggest economies of the world.

The chain of reforms that took place with regards to business, manufacturing, and financial industries targeted at lifting the economy of the country to a more proficient level. These economic reforms had influenced the overall economic growth of the country in a significant manner. Liberalization Liberalization refers to the slackening of government regulations. The economic liberalization in India denotes the continuing financial reforms which began since July 24, 1991.

Privatization

and

Globalization

Privatization 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. Globalization stands for the consolidation of the various economies of the world.

LPG and the Economic Reform Policy of India

Following its freedom on August 15, 1947, the Republic of India stuck to socialistic economic strategies. In the 1980s, Rajiv Gandhi, the then Prime Minister of India, started a number of economic restructuring measures. In 1991, the country experienced a balance of payments dilemma following the Gulf War and the downfall of the erstwhile Soviet Union. The country had to make a deposit of 47 tons of gold to the Bank of England and 20 tons to the Union Bank of Switzerland. This was necessary under a recovery pact with the IMF or International Monetary Fund. Furthermore, the International Monetary Fund necessitated India to assume a sequence of systematic economic reorganizations. Consequently, the then Prime Minister of the country, P. V. Narasimha Rao initiated groundbreaking economic reforms. However, the Committee formed by P.V. Narasimha Rao did not put into operation a number of reforms which the International Monetary Fund looked for. Dr. Manmohan Singh, the present Prime Minister of India, was then the Finance Minister of the Government of India. He assisted P.V. Narasimha Rao and played a key role in implementing these reform policies.

Narsimha Rao Committee's Recommendations

The recommendations of the Narasimha Rao Committee are as follows:

Bringing into the Security Regulations (Modified) and the SEBI Act of 1992 which rendered the legitimate power to the Securities Exchange Board of India to record and control all the mediators in the capital market. Doing away with the Controller of Capital matters in 1992 that determined the rates and number of stocks that companies were supposed to issue in the market. Launching of the National Stock Exchange in 1994 in the form of a computerized share buying and selling system which acted as a tool to influence the restructuring of the

other stock exchanges in the country. By the year 1996, the National Stock Exchange surfaced as the biggest stock exchange in India.

In 1992, the equity markets of the country were made available for investment through overseas corporate investors. Allowing the companies of the country in fund raising on overseas markets through issuance of GDRs or Global Depository Receipts. Promoting FDI (Foreign Direct Investment) by means of raising the highest cap on the contribution of international capital in business ventures or partnerships to 51% from 40%. In high priority industries, 100% international equity was allowed. Cutting down duties from a mean level of 85% to 25%, and withdrawing quantitative regulations. The rupee or the official Indian currency was turned into an exchangeable currency on trading account. Reorganization of the methods for sanction of Foreign Direct Investment. In 35 sectors as a minimum, routinely sanctioning plans within the boundaries for international investment and involvement.

The outcome of these reorganizations might be estimated by the statistic that the overall amount of overseas investment (comprising portfolio investment, FDI, and investment collected from overseas equity capital markets) in the country) rose to $5.3 billion in 19951996 from a microscopic US $132 million in 1991-1992. P.V. Narasimha Rao started industrial guideline changes with the production zones. He did away with License Raj, leaving just 18 sectors which required licensing. Control on industries was moderated.

Highlights of the LPG Policy

Given below are the salient highlights of the Liberalization, Privatization and Globalization Policy in India:

Foreign Technology Agreements Foreign Investment MRTP Act, 1969 (Amended) Industrial Licensing Deregulation Beginning of privatization Opportunities for overseas trade Steps to regulate inflation Tax reforms Abolition of License Raj or Permit Raj

debt.

From Wikipedia, the free encyclopedia