PPT - Liberalisation , Privatisation and Globalisation : An Appraisal | Economics Class 12 - Commerce PDF Download

 Page 1


LIBERALISATION, 
PRIVATISATION AND 
GLOBALISATION: AN 
APPRAISAL
Page 2


LIBERALISATION, 
PRIVATISATION AND 
GLOBALISATION: AN 
APPRAISAL
INTRODUCTION
Mixed Economy Framework
Post-independence India adopted a mixed economy 
model. While critics cited growth limitations, it improved 
savings, industrial base, and food security.
The 1991 Crisis
India's 1991 economic crisis stemmed from mounting 
external debt, loan repayment challenges, and foreign 
exchange reserves dropping below two weeks of import 
cover.
New Policy Direction
Rising prices of essential goods worsened the crisis, 
compelling the government to implement transformative 
policies that fundamentally changed India's development 
approach.
Page 3


LIBERALISATION, 
PRIVATISATION AND 
GLOBALISATION: AN 
APPRAISAL
INTRODUCTION
Mixed Economy Framework
Post-independence India adopted a mixed economy 
model. While critics cited growth limitations, it improved 
savings, industrial base, and food security.
The 1991 Crisis
India's 1991 economic crisis stemmed from mounting 
external debt, loan repayment challenges, and foreign 
exchange reserves dropping below two weeks of import 
cover.
New Policy Direction
Rising prices of essential goods worsened the crisis, 
compelling the government to implement transformative 
policies that fundamentally changed India's development 
approach.
BACKGROUND
Origins of the Crisis
The financial crisis originated 
from inefficient economic 
management in the 1980s. 
Government expenditure 
consistently exceeded revenue, 
with development spending not 
generating adequate returns.
Resource Constraints
The government couldn't 
generate sufficient funds from 
internal sources like taxation. 
Income from public sector 
undertakings was inadequate to 
meet growing expenditure on 
social sectors and defence.
Foreign Exchange Issues
Foreign exchange borrowed 
from other countries was often 
spent on consumption needs. 
Insufficient attention was given 
to boosting exports to pay for 
growing imports.
Page 4


LIBERALISATION, 
PRIVATISATION AND 
GLOBALISATION: AN 
APPRAISAL
INTRODUCTION
Mixed Economy Framework
Post-independence India adopted a mixed economy 
model. While critics cited growth limitations, it improved 
savings, industrial base, and food security.
The 1991 Crisis
India's 1991 economic crisis stemmed from mounting 
external debt, loan repayment challenges, and foreign 
exchange reserves dropping below two weeks of import 
cover.
New Policy Direction
Rising prices of essential goods worsened the crisis, 
compelling the government to implement transformative 
policies that fundamentally changed India's development 
approach.
BACKGROUND
Origins of the Crisis
The financial crisis originated 
from inefficient economic 
management in the 1980s. 
Government expenditure 
consistently exceeded revenue, 
with development spending not 
generating adequate returns.
Resource Constraints
The government couldn't 
generate sufficient funds from 
internal sources like taxation. 
Income from public sector 
undertakings was inadequate to 
meet growing expenditure on 
social sectors and defence.
Foreign Exchange Issues
Foreign exchange borrowed 
from other countries was often 
spent on consumption needs. 
Insufficient attention was given 
to boosting exports to pay for 
growing imports.
THE DEEPENING CRISIS
Unsustainable Expenditure
By the late 1980s, government 
spending far exceeded revenue, 
making borrowing unsustainable. 
Essential goods prices surged while 
imports grew without corresponding 
export growth.
Foreign Exchange Depletion
Foreign exchange reserves fell below 
two weeks' worth of import 
requirements. India lacked funds to 
pay interest to international lenders, 
and no country would extend further 
credit.
International Assistance
India sought help from the World Bank 
and IMF, securing $7 billion in loans. 
These institutions required India to 
liberalize by removing private sector 
restrictions and opening up trade.
Page 5


LIBERALISATION, 
PRIVATISATION AND 
GLOBALISATION: AN 
APPRAISAL
INTRODUCTION
Mixed Economy Framework
Post-independence India adopted a mixed economy 
model. While critics cited growth limitations, it improved 
savings, industrial base, and food security.
The 1991 Crisis
India's 1991 economic crisis stemmed from mounting 
external debt, loan repayment challenges, and foreign 
exchange reserves dropping below two weeks of import 
cover.
New Policy Direction
Rising prices of essential goods worsened the crisis, 
compelling the government to implement transformative 
policies that fundamentally changed India's development 
approach.
BACKGROUND
Origins of the Crisis
The financial crisis originated 
from inefficient economic 
management in the 1980s. 
Government expenditure 
consistently exceeded revenue, 
with development spending not 
generating adequate returns.
Resource Constraints
The government couldn't 
generate sufficient funds from 
internal sources like taxation. 
Income from public sector 
undertakings was inadequate to 
meet growing expenditure on 
social sectors and defence.
Foreign Exchange Issues
Foreign exchange borrowed 
from other countries was often 
spent on consumption needs. 
Insufficient attention was given 
to boosting exports to pay for 
growing imports.
THE DEEPENING CRISIS
Unsustainable Expenditure
By the late 1980s, government 
spending far exceeded revenue, 
making borrowing unsustainable. 
Essential goods prices surged while 
imports grew without corresponding 
export growth.
Foreign Exchange Depletion
Foreign exchange reserves fell below 
two weeks' worth of import 
requirements. India lacked funds to 
pay interest to international lenders, 
and no country would extend further 
credit.
International Assistance
India sought help from the World Bank 
and IMF, securing $7 billion in loans. 
These institutions required India to 
liberalize by removing private sector 
restrictions and opening up trade.
LIBERALISATION
Industrial 
Deregulation
Industrial licensing 
abolished for most 
products except 
alcohol, 
hazardous 
chemicals, and 
pharmaceuticals. 
Only atomic 
energy and 
railways remained 
exclusively in the 
public sector.
Removing 
Restrictions
Liberalisation 
eliminated growth-
inhibiting controls. 
While reforms 
began in the 
1980s, the 1991 
measures were 
more 
comprehensive, 
addressing 
licensing, trade, 
and foreign 
investment.
Market 
Determination
Many small-scale 
industry products 
were dereserved. 
Market forces, not 
government 
controls, now 
determined prices 
in most industries.