The term liberalization refers to freedom to business enterprises from excessive government control. There are less licensing and other formalities to be followed by business forms due to the reforms introduced by the Industrial Policy, 1991 and subsequent economic policies of the government. Economic liberalization was a bold decision by the former Prime Minister P.V. Narasimha Rao.
Liberalization is about –
- Delicensing of Industries: Industrial Policy, 1991, abolished licensing for most industries. Licensing is required only six industries which were of social and strategic importance. The six industries that required licensing includes:
- Industrial explosives
- Defense products
- Drugs and pharmaceuticals, and
- Hazardous chemicals
2. Liberalization of Foreign Investment: prior to 1991 it was necessary to obtain approval from various government authorities for foreign investment in India. This often cause delays and bureaucratic hurdles. The IP, 1991 specified a list of high investment and high tech priority industries wherein automatic approval is provided for foreign direct investment. At present, FDI is allowed even up to 100% in certain sectors such as infrastructure, export, hotels and tourism, etc.
3. Liberalization of Foreign Technology Imports: the IP 1991 liberalized the import of foreign technology in order to bring about technological improvement in Indian industry:
(a) Automatic permission was given for foreign technology import in priority industries up to 2 million US dollars.
(b) no permission was required from government authorities for hiring foreign technicians and foreign testing of indigenously develop technologies.
The 'Make in India' initiative of the government advocates the reduction in dependence of import of foreign technology.
4. Liberalization of Industrial Location: The IP 1991 stated that there is no need to obtain approval from the central government to locate industries anywhere in the country (except in cities with population of over 1 million). However, industries subject to compulsory licensing are required to obtain government approval for industrial location. In cities with population of over 1 million the polluting industries were required to be located 25 kilometers away from the city limit.
5. Liberal Taxation: Government of India has introduced liberal tax regime. The direct tax rates and indirect tax rates have been reduced. For instance, the corporate tax has been reduced to 30% (current level) for Indian firms and 40% for foreign firms operating in India. Also, excise duties and custom duties have been reduced over the years. The customers are also benefited because lower taxes results in reduction in consumer prices.
Definition: The transfer of ownership, property or business from the government to the private sector is termed privatization. The government ceases to be the owner of the entity or business.
The process in which a publicly-traded company is taken over by a few people is also called privatization. The stock of the company is no longer traded in the stock market and the general public is barred from holding stake in such a company. The company gives up the name 'limited' and starts using 'private limited' in its last name.
The two main elements of privatization arte as follows:
1. DE reservation of Public Sector: The number of industries reserved for public sector was reduced from 17 to 8 in1991. There was further DE reservation of public sector. At present, there are only three industries reserved for public sector.
- Atomic Energy
- Specified Minerals.
2. Disinvestment of Public Sector: The disinvestment is undertaken to achieve the following objectives:
What is Globalization?
Globalization is the spread of products, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade.
On the upside, it can raise the standard of living in poor and less developed countries by providing job opportunity, modernization, and improved access to goods and services. On the downside, it can destroy job opportunities in more developed and high-wage countries as the production of goods moves across borders.
The main elements of Globalization include the following:
1. Introduction of Foreign Exchange Management Act, 1999: The government of India introduced FEMA 1999 by replacing Foreign Exchange Regulation Act, 1973. The FEMA, 1999 made foreign exchange transaction easier.
2. Reduction in Custom Duty: The Govt. of India reduced the peak custom duty from 150% in 1991 to 10% (current level) the peak custom duty refers to general custom duty on most of the items. On certain items, the custom duty is 5% or even zero and on luxury items like import of cars, the custom duty is over 100%. Reduction in import duty has resulted in cheaper imports into India.
3. Liberalization of Foreign Investment: The government of India has liberalized foreign investment since 1991. FDI is allowed in number of sectors which can go up to 100%. Also, the portfolio investment by foreign financial institutions has been simplified and liberalized, which in turn has given a good boost to the Indian capital markets.
4. Signing of WTO Agreement: India has signed a number of WTO agreements in order to expand India's trade worldwide some of the agreements include:
- TRIPS (trade related intellectual property rights) Agreement.
- TRIMS (related investment measures) Agreement.
- GATS (agreement on trade in services) Agreement.
- Agreement on Agriculture.
Globalization is the process of interlinking national economy with world economy. It implies free flow of goods and services, labor and capital across national borders.
(A) Positive Effects:
- Benefits of Reduction in Custom Duty: The Govt. of India reduced the peak custom duty from 150% in 1991 to 10% (current level) the peak custom duty refers to general custom duty on most of the items. On certain items, the custom duty is 5% or even zero and on luxury items like import of cars, the custom duty is over 100%. Reduction in import duty has resulted in cheaper imports into India. Also, excise duties and custom duties have been reduced over the years. The customers are also benefited because lower taxes results in reduction in consumer prices.
- Benefits of FEMA 1999: FEMA 1999 enabled Indian forms to raise cheaper funds from abroad through global depository receipts(GDRs), Eurobonds, etc. for expansion and modernization. It also enabled Indian firms to invest abroad to gain prominent place in global markets. Example includes; Tata steel takeover of Corus, Hindalco takeover Novelis, Tata Motors takeover Jaguar and Land Rover, etc.
- Benefits of Foreign Direct Investment: FDI is allowed up to 100% in sectors like infrastructure, exports, hotel and tourism industry etc. In certain sectors like banking, insurance telecom, airlines, etc. there is a limit on FDI which ranges from 26 % to 74%. FDI has generated inflow of foreign capital, expertise and technology which has benefited the Indian partners to a great extent.
(B) Negative Effects:
- Problem for Domestic Companies: The liberalized entry of foreign MNCs in the Indian market may have serious consequences on the domestic industries. The domestic firm find it difficult to compete with highly professional for MNCs.
2. Problem of Foreign Investment: The NIP 1991 liberalize foreign investment in India. At present FDI is allowed in several sectors. However, the MNCs are not very much interested in infrastructure development project involving long gestation period. Also, FDI results in outflow of foreign exchange due to payment of dividend and royalties.
3. Problem of Foreign Technology: The government has 2liberalized the import of foreign technology. Critics point out the following technology may not suit the Indian conditions. Again, there is a possibility of over dependence of foreign technology rather than developing indigenous technology.
Globalization has compelled Indian firms to improve quality and t duce costs. One of the ways to reduce costs is to adopt the policy of 'lean and mean', which could have a drastic effect on the employability in the organizations. The following are some of the implications of globalization on employment in India:
(A) Negative Impact/Changes:
1. Introduction of Labor Saving Devices: Globalization demands that firms need to be competent. There is pressure on the firms to improve quality and to be cost-effective. As a result, business firms resort to labor saving devices such as high speed machines, computerization for computing, processing, and analyzing information, etc. Therefore, there is increasing number of job cuts across various industries in India.
2. Negative Growth of Employment in Public Sector: Due to liberalization, the Govt. has disinvested some of the PSUs. This has resulted in reduction of workforce in the public sector. For instance, the employment in the public sector was 191 lakhs in 1991 but it came down to 176 lakhs in 2013. The most affected public sector industry in terms of employment is the manufacturing industry, followed by construction, transport & communications, electricity, gas and water supply.
3. Employment in Small Scale Sector: The small scale sector is one of the major sectors providing employment in India. The micro and small enterprises provide employment to about 7% of the total workforce in the country. However, the annual growth rate of employment in this sector has remained more or less stagnant during the past several years.
(B) Positive Impact/Changes:
1. Employment in the Services Sector: The employment in the services sector has increased from 20% in 1991 to over 30% in 2018. The main reason is the growth of services sector on account of liberalization, privatization and globalization. For instance, due to globalization, the share of India's services export has increased. In 2017-18, India's services exports was 195 US Dollar Billion. At present, India ranks among the top 10 services exporters of the world.
2. Impact of FDI on Employment: Due to the TRIMs agreement, the member countries of WTO treat foreign investment at par with domestic investment. Therefore, a number of restrictions on foreign investment have been removed. As a result, there has been increase in FDI in India, which resulted in increase in employment opportunities, especially in urban areas. Although the foreign MNCs make use of capital intensive and labor saving technologies, yet they provide employment to people, especially, the skilled workforce.
3. Increase in Contractual Workers: Due to globalization, the share of contractual and causal labor has increased. The increasing trend of contractual and casual workers has reduced the grip of trade unions over the management of firms. Apart from contract workers, some firms resort to outsourcing jobs, which has further weakened the role of trade unions in India.
People who move from one place to another in search of work or shelter are called migrants. Most of the times migrants people are not skilled or educated therefore they usually employed as daily wagers (workers who are paid at the end of each day, for their services). Daily wagers do not get enough money for the survival of their families and suffering from many problems such as they do not have enough food to eat, sanitation, hygiene, a proper place to live etc.
Impacts of Migration
Migration is becoming a very important subject for the life of cities. Many opportunities and attraction of big cities pull large numbers of people to big cities. Migration can have positive as well as negative effects on the life of the migrants.
(A) Positive Impact
- Unemployment is reduced and people get better job opportunities.
- Migration helps in improving the quality of life of people.
- It helps to improve social life of people as they learn about new culture, customs, and languages which helps to improve brotherhood among people.
- Migration of skilled workers leads to a greater economic growth of the region.
- Children get better opportunities for higher education.
- The population density is reduced and the birth rate.
(B) Negative Impact
- The loss of a person from rural areas, impact on the level of output and development of rural areas.
- The influx of workers in urban areas increases competition for the job, houses, school facilities etc.
- Having large population puts too much pressure on natural resources, amenities and services.
- It is difficult for a villager to survive in urban areas because in urban areas there is no natural environment and pure air. They have to pay for each and everything.
- Migration changes the population of a place, therefore, the distribution of the population is uneven in India.
- Many migrants are completely illiterate and uneducated, therefore, they are not only unfit for most jobs, but also lack basic knowledge and life skills.
- Poverty makes them unable to live a normal and healthy life.
- Children growing up in poverty have no access to proper nutrition, education or health.
- Migration increased the slum areas in cities which increase many problems such as unhygienic conditions, crime, pollution etc.
Globalization refers to increases in the movement of finance, inputs, output, information, and science across vast geographic areas. The gains from globalization increase net income in many places and facilitate decreases in levels of poverty and may thereby increase levels of food security. However, there is an implication of frictionless movement and perfect knowledge that understates the requirements for benefiting from globalization.
These trends have been underway throughout history. As reflected in the previous chapter, they have moved unusually rapidly in recent times because the cumulative breakthroughs in basic science have allowed an extraordinary acceleration in the reduction of transfer costs. Real costs of information transfer and shipment of goods have declined rapidly, while perishability and bulk have been drastically reduced. Concurrently, increases in per capita income in many regions, and in the total size of the market, have allowed scale economies to be achieved for myriad new products, most of which involve value added processes that themselves require investment and improved technology.
1. Changes in Food Basket: The food basket is changing rapidly, away from staple food grains towards high-value food products. Therefore, the agricultural production portfolio too is changing rapidly, with a higher growth in production of high-value food products such as fruits and vegetables.
2. Changes in Agricultural Marketing Systems: The changing production and consumption patterns are being accompanied by changes in agricultural marketing systems. The traditional marketing systems dominated by ad hoc transactions are being replaced by coordinated, integrated marketing systems such as supermarkets, retail chains and contract production.
3. Changes in Agricultural Exports: Due to globalization, a shift is taking place in agricultural exports. There is increasing emphasis on exports of high-value food products. The share of fruits and vegetables in the agriculture-related exports is increasing. Also, the share of processed food products is on the increase.
4. Changes in the Share of Agricultural Employment: The share of employment in the agriculture sector has declined over the years. In 1991, the share of agriculture employment was over 60% which has declined to about 48% in 2018. With the increase in literacy, there is growing shift towards employment in the services sector.
In the post reform period, especially, after the introduction of National Agricultural Policy (NAP) 2000, agricultural reforms are being undertaken. A significant role is being assigned to private sector in rural development and poverty reduction. Corporate farming is such initiative attempted in many India states alongside contract farming.Corporate farming refers to farming undertaken by corporate firms. The corporate firms purchase prime agricultural land from farmers who are willing to sell their land. The corporate firms may also purchase or take on lease wastelands from the State Govt. for the purpose of agriculture related activities. The agriculture production is meant for their captive food processing requirement or for sale in the open market.
Several states such as Maharashtra, Gujarat, Goa, MP, AP, Tamil Nadu, Punjab, Karnataka, Chhattisgarh and others have permitted corporate farming. Some of the firms that undertake corporate farming include:
- IEEFL, Pune (Subsidiary of lon Exchange India). It operates farms in Maharashtra, Tamil Nadu, and Goa. It cultivates plantations. It occupies about 1500 acres of land.
- Jamnagar Farms Pvt. Ltd. (Subsidiary of Reliance Industries). It operates farms in Gujarat and Punjab. It deals with agro forestry and horticultural crops. It occupies about 7500 acres of land
- ADAG. It operates in Punjab. It cultivates fruits and vegetables on farm area of 3500 acres.
- SYP Agro, Ahmedabad. It operates in Gujarat. It cultivates onions, spices and vegetables mainly for exports.
- Agri Gold, Hyderabad. It operates in Telangana. It cultivates farm products for export.
- Field Fresh (Joint Venture between Bharti Enterprises and Rothschild). It operates in Punjab. It cultivates fruits and vegetables on an area of 300 acres.
- ARGUMENTS FOR CORPORATE FARMING:
1. Consolidation of Land Holdings: In India, majority (about 90%) of the land holdings belongs to the small and marginal farmers where the land holding is less than 2 hectares. In India, majority of the farmers cultivate on fragmented land holdings. The fragmented landholdings lead to lower agricultural productivity on account of higher costs of cultivation, loss of land for boundaries, etc.
2. Production for Exports: culture is gaining Prime importance in the globalised era. fresh fruits and vegetables, and also the value added farm products such as processed foods products have a good scope in export market.
3. Marketing of Agriculture Produce: Corporate firms are in a better position to market effectively large-scale agriculture production. Agriculture marketing requires good packaging, transportation and warehousing. Corporate firms have the capacity to undertake marketing of agricultural produce more efficiently and thereby reducing wastage and generating higher income.
- ARGUMENTS AGAINST CORPORATE FARMING
The experiment of Corporate farming in many developed and developing countries did not succeed largely due to internal problem of the agribusiness firms. Large-scale corporate farms failed in UK, Venezuela, Ghana, Brazil, Iran and Philippines despite the presence of significant 'external economies of scale' in terms of subsidized input including land, low interest credit and tax and duty benefits.
There is often mismanagement due to lack of relevant farming experience. There was also neglect of field improvement, no contingency planning, and poor labor relations.
A major adverse fall out of Corporate farming was displacement of large number of small farmers. On the other hand, there have been many cases of success when the corporate firms work with local farmers under the contract farming system.
The country has seen a phenomenal increase in farmers’ suicide over the years. the National Crime Record Bureau’s report on accidental deaths and suicide in India places the number for 2001 at 16415 and for 2014 at 5650. The NCRB report for 2015 has not been published.
No. of Farmer Suicide
- CAUSES OF FARMER'S SUICIDES
1. Indebtedness: Major reason for farmers' suicides is indebtedness. Majority of the farmers have to borrow funds for agriculture purpose from money lenders who exploit the farmers by charging high interest rates of over 36% per year and even more. Quite often, the money lenders are backed by corrupt politicians. The money lenders pressurize the indebted farmers to repay the loans, and due to humiliation and distress, the farmers' commit suicides.
2. Higher Input Costs: The input cost of fertilizers, power, and seeds is on the rise. This results in increase in cost of production. which may lead to loss to the farmers. For instance, the costs of Btcotton seeds has been increased in Maharashtra, and Gujarat. Also, the subsidy on fertilizers has been reduced since the entry of private sector in fertilizers manufacturing in the post-reform period.
3. Lower Prices for Output: The farmers in India get lower prices for their output. For instance, the raw cotton price in USA is 8906 per quintal; the Indian farmer gets 4,100 per quintal in 2015. The Govt. declares minimum support prices (MSP) for most crops, but there is a big gap between the cost of production and MSP; as a result of which, the farmers have to suffer loss.
4. Crop Failures: The farmers suffer huge loss due to crop failure. The crop failure may be on account of drought, floods, pests, or some other reasons. the crop failure results in distress in the farmers, which may force them to commit suicide.
5. Lack of Relief Package for Farmers: The farmers hardly get the benefit of relief package announced by the Govt. For Instance, in December 2016, the Maharashtra Govt. announced Rs. 10,512 crore package for farmers in the state affected by recurring droughts. However, there is a possibility that the relief package hardly reaches the farmers due to corrupt local administration.
The Indian Information Technology industry accounts forabout8% of the country's GDP as of 2017-18. It provides employment to e significant number of its tertiary sector workforce. However, only 2.5 million people are employed in the sector either directly of indirectly. According to NASSOM 2017-18, annual revenues from IT sector is over US $ 167 billion.
India's outsourcing industry is expected to increase to US$225 billion by 2020. The most prominent IT hub is Bangalore. The other emerging destinations are Chennai, Hyderabad, Coimbatore Kolkata, Kochi, Pune, Mumbai, Ahmedabad and NCR. India is now one of the biggest IT capitals in the modern world. India ranks second in the world as far as software exports are concerned. In 2017-18, India's share of software exports was over 40% in the total services exports. The services exports of India were about US $ 195 billion in 2017-18.
Today, Bangalore is known as the Silicon Valley of India and contributes 33% of Indian IT Exports. India's second and third largest (Infosys and Wipro) software companies are head-quartered in Bangalore. Mumbai too has its share of IT companies. India's first and largest IT Company TCS is headquartered at Mumbai.
The Communication sector is amongst the fastest growing in India. i India possesses a diversified communication system that links all parts of the country by internet, telephone, telegraph, radio, and television.
Indian telecommunication industry is the world's second-largest in terms of number of subscribers, and the world s fastest growing market in terms of number of new subscribers. India had over 1,000 million active mobile connections in January 2018. The number of Internet users in India stands at 500 million in June 2018.
IMPACT OF IT AND COMMUNICATION
The impact of IT and communication can be explained with reference to advantages (positive impact) and disadvantages (negative impact):
1. Globalization: IT has not only brought the world closer together, but it has allowed the world's economy to become a single interdependent system. This means that we can not only share information quickly and efficiently, but we can also bring down barriers of linguistic and geographic boundaries. The world has developed into a global village due to the help of information technology allowing countries like India and Japan who are not only separated by distance but also by language to share ideas and information with each other.
2. Communication: With the help of information technology communication has also become cheaper, quicker, and more efficient. We can now communicate with anyone around the globe by simply text messaging them or sending them an email for an almost instantaneous response. The internet has also opened up face to face direct communication from different parts of the world with the help of video conferencing.
3. Cost Effectiveness: Information technology has helped to computerize the business processes thus streamlining businesses to make them extremely cost effective money making machines. This in turn increases productivity which ultimately gives rise to profits that means better pay and less strenuous working conditions.
4. Bridging Cultural Gap: Information technology has helped to bridge the cultural gap by helping people from different cultures to communicate with one another, and allow for the exchange of views and ideas, thus increasing awareness and reducing prejudice.
5. 24 X 7 Operational: II has made it possible for businesses to be open twenty-four hours in a week (24 x 7) all over the globe. This means that a business can be open anytime anywhere, making purchases from different countries easier and more convenient. It also means that you can have your goods delivered right to your doorstep without much effort.
6. Employment: Probably the best advantage of information technology is the creation of new and interesting jobs. Computer programmers, Systems analyzers, Hardware and Software developers and Web designers are just some of the many new employment opportunities created with the help of IT.
1. Unemployment: While information technology may have streamlined the business processes, it has also created job redundancies, downsizing and outsourcing. This means that a lot of lower and middle level jobs have been done away with causing more people to become unemployed.
2. Privacy: Though information technology may have made communication quicker, easier and more convenient, it has also brought along privacy issues. From cell phone signal interceptions to email hacking, people are now worried about their once private information becoming public knowledge.
3. Lack of Job Security: Industry experts believe that the internet has made job security a big issue, as technology keeps on changing with each day. This means that one has to be in a constant learning mode, if he or she wishes for their job to be secure.
4. Dominant Culture: While information technology may have made the world a global village, it has also contributed to one culture dominating another weaker one. For example, it is now argued that US influences hoe most young teenagers all over the world now act, dress and behave.
- Foundation course - Manan Prakashan
- Globalisation by Joseph E. Stiglitz
- Globalisation by Dani Rodrek