Liberalization

Presented by: Aman Baghel

 Introduction
The year 1991 saw a financial crisis on the government that acted as a catalyst for
economic reforms. The crisis was due to several factors like the gulf war that
pushed up oil prices and lower remittances from gulf, foreign reserves at all time
low, hyperinflation occurring at the same time.
• This forced the government to launch a new set of economic policy measures.
The government approached the International Bank of Reconstruction and
Development [I.B.R.D] aka World Bank and the International Monetary Fund
[ I.M.F ] to give a loan. The financial assistance came with a rider to open up the
economy and remove restrictions on the private sector. This set of measures was
announced in 1991 as the New Economic Policy.
 Meaning:-

Liberalization of the economy means it’s freedom from direct or physical controls
imposed by the government. Prior to 1991, government had imposed layers of
control on private enterprises in the domestic economy. These included industrial
licencing system, price control or financial control of goods, import licence ,
foreign exchange control , restrictions on investment by big business houses, etc
 Features of Liberalization

•Delicensing:
•Removal of Restrictions
•Foreign Exchanges Market reform :
•Liberalisation of Capital Market: .
•Development of Infrastructures
•Relaxation in Controlling Monopolies
•Industrial Location Policy Liberalised:
 Reforms of Liberalization:-

1. Industrial sector reforms

2. Financial sector reforms
3. Fiscal reforms
4. External sector reforms
 Advantages of Liberalization
• Free capital flow in the economy -
• Diversification of investor portfolio -
• Improvement of stock market performance -
• Impact on the agricultural sector -
 Disadvantage of Liberalization
• Economic destabilisation -
• Increased competition from MNCs - 
• FDI impact on banking sector - 
• Increase of acquisitions and merger -