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CPT Section C General Economics Chapter 7 Unit 2 
Dr C.Anirvinna   
Page 2


CPT Section C General Economics Chapter 7 Unit 2 
Dr C.Anirvinna   
Measures taken by the Government 
Pros and cons of privatization  
Progress of Privatization and disinvestment 
Meaning of Liberalization, Privatization  &  Disinvestment 
Page 3


CPT Section C General Economics Chapter 7 Unit 2 
Dr C.Anirvinna   
Measures taken by the Government 
Pros and cons of privatization  
Progress of Privatization and disinvestment 
Meaning of Liberalization, Privatization  &  Disinvestment 
Reasons for Liberalization in India  
Meaning of Liberalization 
Page 4


CPT Section C General Economics Chapter 7 Unit 2 
Dr C.Anirvinna   
Measures taken by the Government 
Pros and cons of privatization  
Progress of Privatization and disinvestment 
Meaning of Liberalization, Privatization  &  Disinvestment 
Reasons for Liberalization in India  
Meaning of Liberalization 
Heavy government borrowings 
Inefficiency in the use of resources 
Over protection to industry 
Mismanagement of firms and the 
economy 
Mounting losses of public sector 
enterprises 
Page 5


CPT Section C General Economics Chapter 7 Unit 2 
Dr C.Anirvinna   
Measures taken by the Government 
Pros and cons of privatization  
Progress of Privatization and disinvestment 
Meaning of Liberalization, Privatization  &  Disinvestment 
Reasons for Liberalization in India  
Meaning of Liberalization 
Heavy government borrowings 
Inefficiency in the use of resources 
Over protection to industry 
Mismanagement of firms and the 
economy 
Mounting losses of public sector 
enterprises 
Various distortions  
• poor technological development  
• shortage of foreign exchanges 
• imprudent borrowings from abroad 
• mismanagement of foreign exchange reserves 
Low foreign exchange reserves 
Burden of national debt 
Inflation 
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FAQs on PPT - Liberalization, Privatization and Disinvestment - Business Economics for CA Foundation

1. What is liberalization and its impact on the economy?
Ans. Liberalization refers to the loosening of government regulations and restrictions on markets and industries. It aims to promote competition, increase efficiency, and attract foreign investment. The impact of liberalization on the economy includes increased economic growth, higher employment opportunities, and access to a wider range of goods and services for consumers.
2. What is privatization and why is it implemented?
Ans. Privatization is the transfer of government-owned assets, enterprises, or services to the private sector. It is implemented to improve efficiency, reduce government debt, and promote competition. Privatization often leads to increased productivity, innovation, and better service delivery, as private companies have a profit motive and are incentivized to operate efficiently.
3. What is disinvestment and why is it done?
Ans. Disinvestment refers to the sale or liquidation of government assets, such as shares in public sector companies or other investments. It is done to raise funds for the government, reduce the fiscal burden, and encourage private sector participation. Disinvestment can help in reducing the government's stake in non-strategic sectors and promoting market competition.
4. How does liberalization affect foreign direct investment (FDI)?
Ans. Liberalization creates a favorable environment for foreign direct investment (FDI) by removing barriers and restrictions on foreign companies. It allows for greater access to markets, encourages competition, and provides a level playing field for both domestic and foreign investors. As a result, liberalization often leads to an increase in FDI inflows, which can contribute to economic growth and development.
5. What are the potential challenges or risks associated with liberalization, privatization, and disinvestment?
Ans. Some potential challenges or risks associated with liberalization, privatization, and disinvestment include job losses, increased inequality, and market monopolies. Liberalization may lead to the closure of inefficient industries, resulting in unemployment. Privatization can sometimes lead to higher prices for essential services, reducing access for low-income individuals. Additionally, in the process of disinvestment, there is a risk of concentration of economic power in the hands of a few dominant players, leading to monopolies or oligopolies.
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