the wave of economic reform

8/6/2019 The Wave of Economic Reform

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THE WAVE OF ECONOMIC

REFORMj The wave of economic reforms was born out of

the crisis in the economy which climaxed in 1991.

j The main reasons which leads to economic

reforms are :Increasing Fiscal deficit

Increase in Adverse balance of payment

Overall agricultural and industrial production

showed negative growth.

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Foreign Exchange reserves fell

Inflation rate increases to 14%

Confidence of International financial

institutions was badly shaken

Due to Gulf war, the prices of oil rises


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TYPES OF ECONOMIC REFORMS

TYPES OF ECONOMIC REFORMS

LIBERALISATION

PRIVATISATION

GLOBALISATION


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LIBERALISATION

jLiberalization of the economy means to freeit from direct or physical controls imposed

by the Government.jThe various types of controls are as follows:

Industrial licensing system

Price control or financial control on goods

Import licenseForeign exchange control

Restrictions on investment by big business houses


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MEASURES FOR

LIBERALISATIONj Abolition of Industrial Licensing and Registration

j Concession from monopolies Act

j Freedom for expansion and production to

Industries

j Increase in investment limit of SSI

j Freedom to import capital goods

j Freedom to import technology

j Free determination of Interest rate


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ADVANTAGES OF

LIBERALISATIONj Improvements in Industries & service sector

j Free flow of FDI & MNCs

j More availability of imported goods at cheaper

rates

j Quality education and careers to people

j Improvement of technology in the field of SSI &

LSIj Improvement in means of communication and

Transport.


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PRIVATISATION

jPrivatization of Industries means opening

the gates of Public Sector to Private sector

jTransferring the ownership of public sectorto private sector


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CAUSES OF PRIVATISATION

jDisintegration of Socialist Economies

j Inefficient public sector

jUneconomic pricing policyjBurden on the Government

j Inefficient management control


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OBJECTIVE OF PRIVATISATION

j To increase the efficiency and competitive power

of the enterprise.

j To reduce deficit financing.

j To strengthen industrial management

j To earn more and more foreign currency

j To make optimum use of economic resources

j To achieve rapid industrial development


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MEASURES FOR PRIVATISATION

jPrivatization covers three sets of measures

1. OWNERSHIP MEASURES

Total denationalizationJoint Venture

Liquidation

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2. ORGANISATIONAL MEASURES

A holding company structure

Leasing

Restructuring( Financial, Basic )

3. OPERATIONAL MEASURES

Grant of autonomy to PE s indecision making

Provision of incentives to theemployees

Freedom to acquire certain inputsfrom the market

Development of proper investmentcriteria


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GLOBALISATION

j Globalization is the process by which a firmsactivity become worldwide in scope

j Doing, or planning to expand , business globally

j Giving distinction between the domestic market &foreign market

j Locating the production and other physicalfacilities of global business dynamics

j Basing product development and productionplanning on the global consideration

j Global sourcing of factors of production

j Global orientation of organizational structure and

management culture


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FEATURES OF

GLOBALISATION1. NEW MARKETS

Growing global markets in services

New financial marketsDeregulation of antitrust laws of

mergers

Global Consumer markets with globalbrands

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2. NEW ACTORS

Multinational corporationsThe World Trade Organization

International Criminal Court System

Regional BlocsMore policy Coordination groups-

G-77,G-7, OPEC, OECD

3. NEW RULES AND NORMS

Multilateral agreements in trade new agendas

on environment and social conditions

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New multilateral agreements for services

property rights and communicationConventions and agreements on the Global

environment

4. NEW TOOLS OF COMMUNICATION

Internet and electronic communication

Cellular phones

Fax machines

Faster and cheaper transport

Computer aided design


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FACTORS LEADS TO

GLOBALISATIONjHuman Resources

jWide Base

j

Growing EntrepreneurshipjGrowing Domestic Market

jNiche markets

jExpanding Markets

jEconomic Liberalization

jCompetition


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OBSTACLES TO GLOBALISATIONj Government Policy and Procedures

j High cost of basic inputs

j Poor Infrastructure

j Obsolescence

j Resistance to changej Poor Quality Image

j Supply problems

j Small Size

j Lack of Experience

j Limited R&D and marketing research

j Growing Competition

j

Trade barriers

the wave of economic reform

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