Liberalization,Privatisation And Globalisation: An Appraisal - Class 12 Commerce Economics - Extra Questions

Read the extract given below and answer the questions that follow:
PTI Jun 15, 2014
New Delhi: The Finance Ministry has asked the Department of Disinvestment to complete the ground work for sale of shares in state-owned companies soon after the budget to take advantage of the bull phase in the stock market. The government is expected to retain the disinvestment target of Rs 36,925 crore proposed in the interim budget for 2014-15.
(i) What is disinvestment?
(ii) How will privatisation lead t:
(1) Control of budgetary deficits
(2) Flow of funds to Public Exchequer
(3) Greater flexibility in decision making

(a) (i) Disinvestment: It implies transfer of a part of Government Shareholdings in the public sector enterprises to the private sector.
(ii) Control of Budgetary Deficits: There would be no question of budgetary deficit, if the PSUs fielded a 10% return on investment. But in reality it is not so. The budgetary deficit have risen sharply from year to year. For instance, the budgetary deficit which was Rs 1417 crores in 1983-84, has increased to Rs 1,51,000 crores in 2005-06. Therefore, the government can control its staggering budgetary deficit by using the sale proceeds on the shares in PSUs.
2) Flow of funds to public exchequer: Operation of public sector enterprises has been putting a large burden on public exchequer because of huge losses incurred by a number of enterprises and growing subsidy payments. Privatisation would be helpful in reducing this financial burden upon the government. 
3) Greater flexibility in making decisions: Sometimes PSUs suffer losses just due to inadequate autonomy in the 'decision making power' of the management. If the PSUs are privatised, then the production and investment decisions of the management would be free from any Government intervention, and they would be purely guided by profit motive.


Distinguish between.
Liberalisation and Privatisation

Liberalization refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprise. It includes:
a) Abolishing industrial licensing requirement in most of the industries.
b) Freedom in deciding the scale of business activities.
c) Freedom in fixing prices of goods and services.
d) Reduction in tax rates.
Privatization means transfer of ownership or management of an enterprise from thee public sector to the private sector. It includes:
a) Divestiture, or privatization of ownership, through the sales of equity.
b) Denationalization or re-privatization.
c) Contracting- under which government contracts out services to other organizations that produce and deliver them.



Write short notes on the following.
Liberalisation

Liberalization refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprise. It includes:
a) Abolishing industrial licensing requirement in most of the industries.
b) Freedom in deciding the scale of business activities.
c) Freedom in fixing prices of goods and services.
d) Reduction in tax rates.



Answer in detail.
What is LPG? Write in detail. 

Liberalization refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprise. It includes:
a) Abolishing industrial licensing requirement in most of the industries.
b) Freedom in deciding the scale of business activities.
c) Freedom in fixing prices of goods and services.
d) Reduction in tax rates.
Privatization means transfer of ownership or management of an enterprise from thee public sector to the private sector. It includes:
a) Divestiture, or privatization of ownership, through the sales of equity.
b) Denationalization or re-privatization.
c) Contracting- under which government contracts out services to other organizations that produce and deliver them.
Globalization refers to the process of growing economic interdependence of countries worldwide through increasing the volume and variety of cross-border transactions in goods and services and of international capital flows through the more widespread diffusion of technology. It includes:
a) Growing global market in service- banking, insurance, transport.
b) Setting up of new financial markets.
c)The creation of the WTO to stimulate cross-border trade.



Explain the concept of "Globalization" and "Liberalization".

Prior to 1991, there were large number of government restrictions in India in the areas of licensing, import and export trade, dealings in foreign exchange, etc. In July, 1991, a package of economic reforms was announced, which marked the beginning of process of "Liberalisation, Privatisation and Globalisation" in India.

Concept of Liberalisation:
Meaning of Librelaisation- Liberalisation means removal of entry an growth restrictions on the private sector.

Objective of Liberalisation Policy:

  • To increase competition amongst domestic industries.
  • To encourage foreign trade with other countries with regulated import and export.
  • Enhancement of foreign capital and technology.
  • To expand global market frontiers of the country.
  • To diminish the debt burden of the country.

Meaning of Globalization- It means integrating the national economy with the world economy through removal of barriers on international trade and capital movements.

Objectives of Globalisation:
  • The main aim is to transform the world towards independence and integration of the world as a whole by setting various strategic policies.
  • Globalization is attempting to create a borderless world, wherein the need of one country can be driven from across the globe and turning into one large economy.


Class 12 Commerce Economics Extra Questions