LPG PRESENTATION

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LPG PRESENTATION


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GLOBALISATION PRIVATISATION: OPENING UP OF THE INDIAN ECONOMY : GLOBALISATION PRIVATISATION: OPENING UP OF THE INDIAN ECONOMY Presented By: Ms. Anju Tripathi Assistant Professor Department of Humanities JSSATE, NOIDA 1

Introduction : Introduction Globalisation is the buzzword that has come to dominate the world since the nineties of the last century. Till 90s the process of globalisation of the Indian economy was constrained by the barriers to trade and investment. Liberalisation of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and making the Indian economy as fastest growing economy and globally competitive. 2

Slide3 : This era of reforms has also ushered in a remarkable change in the Indian mindset, as: it deviates from the traditional values held since Independence in 1947, such as self reliance and socialistic policies of economic development, which mainly due to the inward looking restrictive form of governance, resulted in the isolation, overall backwardness and inefficiency of the economy. 3

Slide4 : In July 1991,India has taken a series of measures to structure the economy and improve the BOP position. The new economic policy introduced changes in several areas. The policy has salient feature which are: - 1.Liberlisation 2.Privatization 3.Globalisation of the economy Which are known as “ LPG ”. (libearlisation privatisation globalisation) 4

Liberalization : Liberalization Liberalization refers to the relaxation of the previous government restriction usually in area of social and economic policies. When government liberalized trade , it means it has removed the tariff ,subsidies and other restriction on the flow of goods and services between the countries. 5

The Path of liberalization : The Path of liberalization Relief for foreign investors Devaluation of Indian rupees New industrial Policy New trade policy Removal of import Restrictions Liberalization of NRI remittances Freedom to import technology Encouraging foreign tie-ups MRTP relaxation Privatization of public sector 6

Privatization : Privatization Privatization means transfer of ownership and/or management of an enterprise from the public sector to the private sector . It is opening up of an industry that has been reserved for public sector to the private sector. Privatization means replacing government monopoly with the competitive pressures of the marketplace to encourage efficiency, quality and innovation in the delivery of goods and services . 7

Need for Privatization. : Need for Privatization. Though the PSUs have contributed heavily to develop the industrial base of the country, they continue, even today, to suffer from a number of shortcomings which are identified below very briefly :- A sizable number of PSUs have been incurring and reporting losses on a continual basis. Consequently, a large number of PSUs have already been referred of loss giving units; Multiplicity of authorities to whom the PSUs are accountable; Delay in implementation of projects leading to cost escalation and other consequences; 8

Slide9 : Ineffective and widespread inefficiency on management; With a view to provide opportunities for more and more unemployed youths, more number of people, than required, were recruited and therefore, many PSUs are over-staffed resulting in lower labor productivity, bad industrial relations, etc.; Large number of sick companies. 9

Methods of privatization : Methods of privatization Main methods: Share issue privatization selling shares on the stock market. Asset sale privatization selling entire organization to a strategic investor by auction. Voucher privatization distributing ownership to all for free or at lower cost. 10

Slide11 : Sub methods: Contracting out: Production of service by private firm under a contract. Under this scenario, the private sector firm is paid directly by the government Example: collection of disposal waste Other things include security services, data processing services 11

Slide12 : Franchising: Government awarding a rights to perform services within a specific geographic area to a private firm The private firm generates revenue by collecting user fees Example: Cable television, gas etc .. Open competition: many private firms are allowed to compete for customers within a governmental jurisdiction. It is not appropriate for some services as it most likely would not be efficient to have multiple suppliers of electricity, gas, or water service. Example: It typically seen telephone and internet service provider 12

Some of the examples of privatization : Some of the examples of privatization Toll roads, bridges and airport: A significant developments in public private partnerships is the lease of toll roads, bridges, and tunnels by state and local governments to private contractors. these kinds of deals have previously occurred in Europe and Australia Government could not do in 50 add years, privatization did in just 4-5 years. The result is we have a great highways and airports. 13

Slide14 : Ports: Mundra port in Gujarat has bacame a highly efficient and well managed major port in 10 years. * Banking : ICICI bank is the country’s largest private bank in India and second place after the SBI. 14

Six industries which are not reserved for private sector : Six industries which are not reserved for private sector Cigarette Atomic energy Indian railways

Slide16 : Chemical fertilizers Arms and ammunition Hazardous chemicals

Advantages of Privatization : Advantages of Privatization Privatization helps to reduce the burden on Govt. It will help profit making public sector unit to modernize and diversify their business. It will help in making public sector unit more competitive. It will help to improving the quality of decision making, because the decisions are free from any political interference. Privatization may help in reviving sick units which are the liability of the public sector. Industrial growth. Increase the foreign investment. Increase in efficiency. 17

Guy Brainbant says that…. : Guy Brainbant says that…. T he process of globalization not only includes opening up of world trade, development of advanced means of communication, internationalization of financial markets, growing importance of MNCs, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution. I ntegration of economies of the world through abandoned trade and financial flows, as also through mutual exchange of technology and knowledge. Ideally, it also contains free inter-country movement of labor. 18

Reasons for implementing LPG : Reasons for implementing LPG In July 1991 in Indian economy fiscal deficit was very high. F oreign currency reserves had fallen to almost $1 billion. Mismanagement of the firms and the economy. Increase in losses for public sector enterprises. Various distortion like poor technological development, low foreign exchange reserves and more borrowings from abroad. Inflation at annual rate of 17 percent. F oreign investors and NRIs had lost confidence in Indian Economy. 19

The Important Reform Measures (Step Towards liberalization privatization and Globalization) : The Important Reform Measures (Step Towards liberalization privatization and Globalization) Devaluation:  Devaluation of Indian currency by 18-19 percent in order to resolve the BOP crisis. Disinvestment - Under privatization and liberalization policies , most of the public sector undertakings have been/ are being sold to private sector. Dismantling of The Industrial Licensing Regime:   At present, only six industries are under compulsory licensing. Non Resident Indian Scheme  : more than 60% stake by NRIs 20

Slide21 : Allowing Foreign Direct Investment  (FDI ): O pening up of sectors such as: * Insurance ( upto 26 %) * Development of integrated townships ( upto 100 %) defense industry ( upto 26 %) * Enhancement of FDI limits in private sector banking allowing FDI up to 100% under the automatic route for most manufacturing activities in SEZs * Opening up B2B e-commerce; Internet Service Providers (ISPs) without Gateways etc. 21

Slide22 : Abolition of the (MRTP)  Act The removal of quantitative restrictions on imports. The reduction of the peak customs tariff    from over 300 per cent prior to the 30 per cent rate that applies now. Wide-ranging financial sector reforms  in the banking, capital markets, and insurance sectors, including the deregulation of interest rates, strong regulation and supervisory systems, and the introduction of foreign/private sector competition. 22

Impact of Globalization on Indian Economy : Impact of Globalization on Indian Economy The novel “Tale of Two Cities” of Charles Dickens begins with a description of the contradictions of the times: It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of disbelief; we had everything before us, we had nothing before us.   At the present, we can also say about the tale of two India's: We have the best of times; we have the worst of times. There is sparkling prosperity, there is stinking poverty. We have dazzling five star hotels side by side with biggest slum of Asia. We have everything by globalization, we have nothing by globalization. 23

Two different face of globalization in India : Two different face of globalization in India

The Bright Side of Globalization : The Bright Side of Globalization India's economic growth has been high, exports have boomed, employment has surged, long-term inflation rate has gone down, scarcity of goods have disappeared, the quality of products available have improved substantially and overall India has become progressively vibrant and internationally competitive. Growth of the service sector due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. In advanced economies the growth in the primary and secondary sectors are directly dependent on the growth of services like banking, insurance, trade, commerce, entertainment, etc. 25

: The rate of growth of the Gross Domestic Product of India has been on the increase from 5.6 per cent during 1980-90 to 9.2% in the 2006-07. The foreign exchange reserves (as at the end of the financial year) were $ 39 billion (2000-01), $ 107 billion (2003-04), $ 145 billion (2005-06) and $ 180 billion (in February 2007). In respect of market capitalization India is in the fourth position with $ 894 billion As per the Forbes list for 2007, the number of billionaires of India has risen to 40 more than Japan (24), China (17), France (14) and Italy (14 ). 26

Slide27 : The major items of India’s exports are Petroleum Products, Gems & Jewellery, Pharma Products, Transport equipment, Machinery & Instruments and Readymade garments. While the major items imported to India are Petroleum Crude , Gold & Silver, Electronic Goods, Pearls & Precious Stones, Non- electrical Machinery and Organic & Inorganic Chemicals. The major destination of India’s export has been Asia, Europe and North America . United Arab Emirates remain on top position in terms of best export destination, while China remains the best import destination for India. 27

Volume of India’s Exports and Imports from 2001-2013 (Source: Ministry of commerce and industry, Government of INDIA) : Volume of India’s Exports and Imports from 2001-2013 (Source: Ministry of commerce and industry, Government of INDIA) YEAR TOTAL EXPORTS TOTAL IMPORTS 2001-02 43,826.72 51,413.28 2002-03 52,719.43 61,412.14 2003-04 63,842.55 78,149.11 2004-05 83,535.94 111,517.43 2005-06 103,090.53 149,165.73 2006-07 126,414.05 185,735.24 2007-08 163,132.18 251,654.01 2008-09 185,295.36 303,696.31 2009-10 178,751.43 288,372.88 2010-11 251,136.19 369,769.13 2011-12 305,963.92 489,319.49 2012-13 (APR-SEP) 142,093.79 235,049.40

India’s Trade in Services (US$ billions) Source: RBI : India’s Trade in Services (US$ billions ) Source: RBI Year Exports Imports 2006 57.7 34.5 2007 73.8 44.3 2008 90.3 51.5 2009 106.0 52.0 2010 95.7 59.5 2011 131.7 83.0 2012 140.9 76.9

The Dark Side of Globalization   : The Dark Side of Globalization   On the other side of the medal, there is a long list of the worst of the times, the foremost casualty being the agriculture sector. In 1951, agriculture provided employment to 72 per cent of the population and contributed 59 per cent of the gross domestic product. However, by 2001 the population depending upon agriculture came to 58 per cent whereas the share of agriculture in the GDP went down drastically to 24 per cent and further to 22 per cent in 2006-07. Globalisation has lowered the per capita income of the farmers and increased the rural indebtedness. In India about 60% of the population directly depending on this sector , low agricultural growth has serious implications for the inclusiveness of growth. 30

Slide31 : The farmers are destined to die of starvation or suicide . Replying to the Short Duration Discussion on Import of Wheat and Agrarian Distress on May 18, 2006, Agriculture Minister Sharad Pawar informed the Rajya Sabha that roughly 1,00,000 farmers committed suicide during the period 1993-2003 mainly due to indebtedness. During the post-reform period, India has been shining brilliantly with a growing number of billionaires. Nobody has taken note of the sufferings of the family members of those unfortunate hundred thousand farmers. 31

Growth of Unemployment & Poverty   : Growth of Unemployment & Poverty   ILO Report (2004) stated: In India, there had been winners and losers. The lives of the educated and the rich had been enriched by globalization. The information technology (IT) sector was a particular beneficiary. But the benefits had not yet reached the majority, and new risks had cropped up for the losers the socially deprived and the rural poor. 32

Growth of Slum Capitals : Growth of Slum Capitals Mumbai city has 54 per cent in slums.  It is estimated that 100 to 300 new families come to Mumbai every day and most land up in a slum colony. Mumbai is known as slum capital of India and the biggest slum of Asia, it is all set to become the slum capital of the world . In Delhi, 45 per cent population lives in slums, unauthorized colonies, JJ clusters and undeveloped rural parts. The FDI inflows have in no way assisted in improving the health and environment conditions of the people. 33

To make Globalization Work   : To make Globalization Work   India should pay immediate attention to ensure rapid development in education, health, water and sanitation, labor and employment. A strong foundation of human development of all people is essential for the social, political and economic development of the country . O ur progress in education has been slow and superficial, without depth and quality, to compete the international standards, so quality of education should be improved. G overnment should take immediate steps to increase agricultural production and create additional employment opportunities in the rural parts. 34

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