Liberalisation Privatisation Globalisation (LPG) Part 2 - In 25 years did India achieve anything? Video Lecture | Indian Economy for Government Exams (Hindi) - Bank Exams

[Music]
[Applause]
hello and welcome to study IQ in the
previous lecture we were discussing
about the LPG and it's appraisal so we
have already seen what is LPG and what
was a background of adopting LPG into
our country and we were analyzing
liberalisation privatization and
globalization separately and out of that
in the previous lecture we have seen
what is liberalisation and how it has
impacted various sectors in the Indian
economy now let us move on to
privatization what does privatisation
means privatization means that shedding
of ownership or management of
government-owned companies so it is a
process of privatizing means the
ownership or management rights are given
to the private sector ownership or
management given to the private sector
so so earlier it was government and
under price now it is being transferred
to the private sector so for this the
government has to this enlist so this
process is called this investment so
what does disinvestment this investment
means privatization of public sector on
reprises privatization of public sector
and under prices PLC's and how is this
privatization done this privatization is
done by selling a part of the equity
selling equity of this public sector on
to prices to the public to the public
means to the private individuals so this
investment means privatization of PSS by
selling of the shares or the equities of
the PSE to the general public
now let us see what is the aim or motive
behind privatization so the first name
of privatization is to bring in private
capital so privatization will help in
improving the capital capacity of the
company which means the company will
have more capital increase in capital
will lead to increase in investment
so investment will increase so this will
lead to modernization of the company's
modernization which means modern
technologies innovations can be adopted
in the companies also another advantage
is that we have already seen there was
inefficiency associated with government
under prices so this will also lead to
the privatization will also lead to
improvement in managerial skills so the
government influence will come down
which means private entities will have
more freedom so when they have more
shares they will have more voice so
managerial skills also will improve and
efficiency of the companies will also
increase also another advantage of
privatization is that this can attract
foreign direct investment so FDA will
also flow into the sector's so what is
SDI FDA is in the form of investment in
the so if there is in the form of
capital technology manpower
infrastructure etc so this will have
long term impact in the economy so
privatization will attract FDI which
will have long-term economic benefits
another thing to be noted here is that
under privatization the existing PS use
or the PS use well granted some status
and it was mainly three status oneness
Mahatma navaratna and mini Radner so we
will discuss about what is maharat
novotná and mini Ratna van relearned
industries so in short privatization or
the aim of privatization was to
privatize or sell-off the shares of
government-owned companies through
disinvestment so next we will see what
is globalization by definition
globalization is the integration of our
economy with the world economy that
means we are integrating the economies
of different countries so India can
easily interact with other world
economies they can also come to India
and we can have a indica interaction the
idea behind globalization is to cry
borderless world so world without
boundaries which means that any economy
is free to interact with other economies
or economic activities will take place
in an open economy without any borders
then we learn globalization outsourcing
is one important term you should know so
let us see what does outsourcing
outsourcing means hiring regular
services from other sectors or external
sources so basically this hiring
services from external sources in the
context of globalization outsourcing
means that hiring basic services or
regular services from other countries so
what is an example of an outsourcing
example a US company this company will
have call centers in India so in India
what the employees do is they will
outsource or they may provide services
to customers in other country that is in
this example it is the u.s. so in the
call centers what the people or
employees do is they talk to customers
from us so this is what is known as
outsourcing this is an example of
outsourcing so when a company decides to
outsource its services what the company
looks for two things mainly lower wage
rate and skilled manpower so they just
should be low and manpower should have
skilled so for these reasons India has
become a favorite destination for
outsourcing because lower wages
employees are available and also skilled
employees because of our demographic
dividend so for this reason India has
become a favorite destination of
outsourcing and this can be the other
way also like Indian companies can hire
services from other countries as well
now we have seen what this globalization
what this privatization and what is
liberalisation we have also discussed
what is the impact of all this in the
Indian economy so we have seen many
positive changes started coming to our
economy and economy prospered but on the
other side there will be some negative
impacts as well
so let us analyze
our assess what are the impact of
globalization privatization and
liberalization from the other side let
us first see agriculture or agriculture
sector the First's impact was that the
GDP contribution of agriculture declined
if you look at the statistics the GDP
contribution has decayed and what is a
reason for that
for the GDP we have already seen that
GDP is the monetary value of all the
final goods and services produced in an
economy so in an economy you should
always remember within the domestic
territory so what happened with
globalization liberalisation and
privatization the imports increased so
important increased means these imports
are produced outside the domestic
territory of the country so this will
not be calculated in our GDP so what
happened the GDP contribution of the
agriculture declined secondly the public
investment in agriculture also declined
the public investment means the
government investments so here this is
public means the government investment
why did the government investment come
down we have seen that privatization
means government is selling off and we
also learned that government is now only
a facilitator not the regulator so the
role of the government has decreased so
the government started reducing the
rates of investment also so when the
government expenditures came down on
agriculture what happened was the cost
of production in agriculture increased
so for example fertilizer subsidies
earlier the government used to provide
subsidies for fertilizers now after that
the government decreased the amount of
subsidies so so the farmers have to
incur that expense from their pocket so
what happens it will increase the cost
of production of the commodity so when
cost of production increases what will
happen it will increase the prices of
the commodities and there is already
competition from other countries so in
the market goods are availa
what will happen is that poor farmers
will suffer so cost of production of the
farmers increased another impact to us
increased international competition we
have already seen with a decrease in the
government expenditure the cost of
production of the farmers has gone up so
when the cost of production goes up
farmers have no way out except to
increase the prices of the commodities
but now the farmers cannot even increase
the prices because if these farmers
increase the prices what will happen
consumers will not buy their product so
already there is an international
competition in the market which means
that there is adequate supply in the
market so the international products are
enough for the consumers to satisfy the
demand so with increased price in the
local market or increased price of local
commodities then demotivate the
consumers from purchasing these products
so this has made a huge impact on the
farmers they had to suffer very badly
again we will see that the policies of
the government where export oriented so
the policies will export-oriented why
because now it is an open economy so
there is no trade boundaries or less
straight boundaries so the country
always tries to export its commodities
in order to increase its forex reserves
and also to increase the international
competitiveness so the policies of the
government when supporting the exports
so what happened it had two effects one
is that this led to production of cash
crops in the economy so cash crop means
those commodities which are of high
value of exports for example pepper or
cashew nut or coffee tea etc such crops
were more cultivated and this led to a
decrease in the cultivation of food
crops so food crops cultivation came
down and this led to shortage of food
again again this decreased level of food
crops production led to increase in the
prices of food crops and this led to
food inflation in the economy so food
inflation was also there
these were the main negative impacts in
agriculture next coming to the
industrial sector industry we will see
that in the industrial sector there was
a recorded slowdown and why was this
load on this was because of decreasing
demand of industrial goods why there was
a decrease in the demand of industrial
goods because cheap imports were
available cheap imports were available
in the market so what will the consumer
do as a consumer I and you will purchase
cheap imports or cheap commodities so
Indian industries had less growth or
their commodities did not have demand in
the market and this led to decline in
the growth of Indian industries if we
take the example of manufacturing sector
with the liberalization privatization
and globalization for example Chinese
commodities entered Indian market so we
all know that Chinese products have less
cost because of the higher subsidies
given by the Chinese government
so when Chinese goods come to our market
what will happen our commodities will
have lesser demand suppose you are going
to a market you need something let us
assume you need an electronic product so
you will find both Indian as well as
Chinese the quality will be somehow
almost the same and Chinese product will
be half the price of the Indian product
which one be you buy of course the
Chinese one so with this you understand
how this affected the Indian industries
and that is why we have all this anti
dumping policies and also we have
initiated the make in India initiative
and all that we will discuss all this
later in some other modules so coming
back to our topic
this was one major drawback slowdown in
the Indian industries secondly our
domestic manufacturers or the domestic
producers they had to all on a sudden
face international competition you must
understand that they were not capable of
competing with the international
competition so they were not competing
enough and this affected the domestic
manufacturers or domestic producers in
the economy thirdly you must understand
that even though the economy was Leiber
privatization globalized we had lesser
access to developed countries markets so
developed countries markets they had
imposed higher tariff rates so our
exports have not reachable all we had
lesser access to developed countries
market for example US market USA has
quota restrictions on textile import
from India and China so this is an
example so we had lesser access or
limited access to markets of the
developed countries this was also one
drawback now coming to the disinvestment
we have already seen notice
disinvestment it is selling of the
shares and equities of government-owned
companies to the private or to the
public general public so we have seen
under privatization government adopted
the policy of this investment let us see
what went wrong in this investments so
under disinvestment government had
targets every year which means that the
government targeted to sell off a
particular amount of shares every year
so government had yearly targets for
disinvestment and government had to
somehow meet this targets so it was
necessary for the government to meet the
targets also this led to the problem of
under evaluation so under valuation of
assets under evaluation means the assets
did not get enough value or when telling
of the assets government did not get the
value of assets means that it's not sold
of lesser value so this also led to
lesson revenue for the government which
means if and if assets are undervalued
the revenue loss will be there for the
government so this was one major
disadvantage associated another problem
associated with the disinvestment was
that the revenue record from
disinvestment the revenue which the
government received from disinvestment
was not used properly so the revenue
could have been used for the development
of the pse itself all for creating
social infrastructure
either it could have been used for the
development of PSE or social
infrastructure but really what happened
was this revenue from the PSE swell you
for government expenditures so this was
not properly utilized now let us see
what happened with the fiscal policies
we have already seen that fiscal means
public purse which means that it is
related to tax and government
expenditure so this is related to
taxation and the government expenditure
so now let us see what happened with the
fiscal policies of the government that
this taxation as well as the government
expenditure so under the fiscal policies
three important things happened one was
a decrease in the tax rates we have
already seen the taxes or the rate of
taxes were reduced in order to curb the
tax evasion secondly the tariffs were
reduced so tariffs on trade was also
reduced thirdly taxes were
thirdly tax incentives were given to
foreign companies so let us see what has
happened decrease in tax rates so our
decrease in tax rates so it means that
when the tax rates decreases the revenue
of the government also decreases revenue
decreases again coming to tariff rates
this was also decreased again the
revenue of the government decreased now
let's say revenue from tariffs again tax
incentives to foreign companies which
means that they also have to pay now
lesser tax so again revenue loss for the
government so these three things
culminated into great revenue losses for
the government and what will happen when
government will have lesser revenue the
expenses of the government will come
down so with lesser revenue the
government will reduce its expenditure
so when government reduces the
expenditure what will happen the
government will have to compromise on
Social Development so government will
spend less on social infrastructure or
social issues like poor the unemployment
etc so the developmental expenditure of
the government reduced again the
government cannot reduce its
expenditures to a larger extent what
the government do borrowings so the
borrowings increased with an increase in
fiscal deficit so revenue decrease which
means that expenditure is more than the
revenue this will lead to fiscal deficit
and with fiscal deficit government is
compelled to borrow money so so this was
what happened with the taxation we have
already seen what is the impact of LPG
in the Indian economy we have also
assessed what were the negative impacts
now let us see how this LPG policy or
the new economic policy has helped India
to attain better heights in growth and
development first of all it created a
vibrant economy which means that the
competition of the economy increased
foreign entities came into the economy
so our exports increased imports
increased consumers have more choice so
the market itself became so vibrant
secondly it became a stimulus for the
industrial production now raw materials
are easily available also that is
foreign competition which means that our
industries have to show their quality or
bring up their best in order to survive
in the market so it sound as a stimulus
to the industrial production again we
have seen how it has helped us to curb
the fiscal deficit foreign investments
in the country increased so foreign
investments increased FDI increased
foreign institutional investments
increased exports also increased now the
government is only a facilitator not the
regulator so the government so the pilot
entities are allowed to invest in the
market investment can be done by the
private entities and foreign companies
which means that the expenses of the
government came down also the revenue of
the government increased this led to
decrease fiscal deficit of the
government this has also led to decrease
in inflation so when the economy was
opened up there was excess of supply in
the economy this has reduced the supply
demand gaps and this led to keeping the
prices under control so now supply meets
the demand so there is no issue of price
rise due to decrease supply so this has
checked the inflation in the country
again this has helped the consumers as
well how consumers have more choice now
they can choose from a variety of
products that are available in the
market earlier they had to choose from
one or two products and and those
producers would charge higher prices
because there is no competition so
consumers had to pay higher prices and
also they had to compromise on the
quality of the product now they get
better products at better price because
there is increased competition in the
market
foreign exchange reserves in the country
also increased forex reserves
also increased we adopted the new
economic policy in the backdrop of
shortage of forex resources so how did
the Forex increase in the country
because there is small FII FDI that is
foreign investment coming into the
country also our exports also increased
because the government adopted Export
Promotion schemes and policies so
exports increased also foreign
investment also increase these were all
in the form of Forex so the forex
reserves in the country increased in
fact we had a shortage of Forex but now
that problem is also solved again
private and foreign investment flowed
into the economy private and foreign
investment with disinvestment
privatization was ensured also the
economy was opened up to receive foreign
capital so this has increased the
infrastructure in the country led to
modernization and we have learned that
with privatization the efficiency also
increased because of better managerial
skills so efficiency of the companies or
firms increased so all this happened due
to private and foreign investments so
but the capital means better technology
this will lead to modernization
it will also lead to increase in the
output increase in the output will lead
to increase in GDP GDP increase means
there is growth in the economy also
infrastructure was provided better
efficiency better efficiency again will
lead to increase output in the economy
India became India became an emerging
economic power
so in day's address this emerging
economic power this is by developed
countries so what does it mean when they
call India as an emerging economic power
it means that they are willing to invest
in the country this will attract foreign
investment and private investment in the
country so with increased investment the
country will prosper there will be
growth as well as development in the
country in the form of infrastructure
more output more productivity more
employment for higher education etc
another important thing is that earlier
it was a monopoly and now it is
competition the shift from monopoly to
competition for example in the 1990s if
you wanted to purchase a car what would
you do you have very less options left
with you so the consumer had lesser
options but later on what we see is now
you have a large variety of options so
from various options you can choose
which one you want and at the better
rising also so the market was a monopoly
and this shifted to a competition so
perfectly competitive market we cannot
forego the merits when we consider the
demerit and in this world LPG is
something you cannot forego so this was
an apt decision to adopt new economic
policy fertilization privatization and
globalization in this global world India
cannot stand alone so it is necessary
that we also cooperate with the global
world
[Music]
[Applause]
[Music]