Liberalisation, Privatisation, and Globalisation: Know All About LPG in Classes With News18
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LPG were part of the stabilisation measures undertaken by the government under the New Economic Policy (Representative Image/PTI)
Modern-day India is the product of some decisions that were taken to handle the 1990 economic crisis. Let us understand one of the major reforms of LPG in Classes With News18
LPG or Liberalisation, Privatisation, and Globalisation are the three elements of the new economic model of the country. Economic liberalisation refers to the reduction or elimination of government regulations or restrictions on private business and trade. Privatisation means the transfer of ownership, management, and control of the public sector enterprises to the private sector. Globalisation refers to the integration of the economy of the nation with the world economy.
LPG aims to develop the economy of the country fast so that it can compete and complement the world’s economy. Let us get to understand how the Indian economy changed after the 1990s in Classes With News18.
What is the need for LPG?
In the 1980s, India was facing an economic crisis. In 1990, the BOP (Balance of Payment) crisis hit India. The rising fiscal deficit and increasing overvaluation led to this chaos. In addition, the uncertain political situation in the country only added fuel to the fire. This led to India approaching the IMF (International Monetary Fund) and the World Bank for emergency lending. But for that to happen certain conditions were placed before the government that had to be fulfilled. Structural reforms had to be made in order to revive the economy.
The then finance minister, Dr Manmohan Singh, along with Prime minister PV Narasimha Rao, unveiled Liberalisation, Privatisation, and Globalisation (LPG) that removed restrictions that hindered the industries. LPG was part of the stabilization measures undertaken by the government under the New Economic Policy. Let us have a look at these in detail.
Liberalisation
Liberalisation of the economy means its freedom from direct or physical controls imposed by the government. After Independence, the government decided to take a protective approach and closed the economy to the outside world. This was done because the new industries were not strong enough to compete with international companies and would eventually be pushed away by them. The objective of liberalization was to put an end to those rigidities and restrictions that were acting as a hindrance to the growth of the country. India opened its economic borders to other countries in a gradual manner by reducing restrictions. This allowed foreign investors and the private sector to invest in domestic companies. It led to a free market system where there were reduced restrictions and interference by the government.
Privatisation
Privatisation is the general process of involving the private sector in the ownership or operation of a state-owned enterprise. Earlier, the companies were all state-owned as the leaders at that time thought of India as a socialist country, working for social welfare. The government controlled the prices and regulated everything. To open up the economy, this had to change. Government companies can be converted into private sector companies with two approaches. These approaches are by withdrawing the control of the government in the public sector company and by disinvesting. This policy, therefore, aims to improve the financial situation in the country and reduce the work pressure on public sector companies.
Globalisation
Globalisation is a process associated with increasing openness, growing economic interdependence, and deepening economic integration in the world economy. The attempt here is to create a borderless world in which goods, services, and people move seamlessly across borders. It includes opening the boundaries for multinational companies to start manufacturing and retailing in the country. It also allows domestic companies to grow and reach international levels in terms of business. The focus was on foreign trade and investment. One of the major outcomes of globalisation is outsourcing. Outsourcing means an enterprise can employ professionals from other countries to reach a particular goal.
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