Qs.1-What do you mean by globalisation? What are its main components? What steps were taken towards globalisation?
Qs.2-What do you mean by Privatisation? What steps were taken for privatisation in india?
Ans 1. Globalisation can be defined as a process associated with increasing openness, growing economic independence and promoting economic integration in the world economy.
Some of the important strategies followed by India in the direction of globalisation are as follows.
1. Encouragement to Foreign Capital Investment: With the aim of encouraging foreign capital investment, the following steps were taken.
- The equity limit of foreign capital was raised from 40% to 51% to 100%.
- Foreign Direct Investment up to 100% was also allowed in high priority industries.
- Foreign capital investment upto 100% was allowed in the export houses.
- Special Economic Zones (SEZs) were set up for the promotion of exports. The industries in the SEZ's were provided with infrastructure facilities such as electricity, roads, transport, storage, etc.
- Foreign Exchange Management Act (FEMA) was introduced with the view of attracting higher foreign investment.
2. Partial Convertibility of Rupee: Under the reforms, partial convertibility of rupee was also allowed. Partial convertibility implies that for the purpose of international transactions, foreign currency could be bought or sold at a market determined price for transactions involving import and export of goods and services, remittances to the family and for interest or dividend payments on investment. However, this convertibility was not applicable for capital transactions. Hence, the name partial convertibility.
3. Removal of Barriers: Various barriers on trade such as tariffs, custom duties, quotas, etc. were reduced considerably.
4. Facilitation of International Trade: With the formation of WTO, various restrictions that were been imposed on the trade were removed. Except for some specific goods, open competition was encouraged in the trade market.
Ans 2. Privatisation refers to the process of increasing the involvement of private sector in the ownership or operation of a state owned enterprise.
The following are some of the policy measures adopted for privatisation in India.
1. Reducing the Role of Public Sector: Under privatisation, the number of industries that were exclusively reserved for the public sector was reduced considerably from 17 to 8. At present, only 3 industries are exclusively reserved for the public sector namely, railways, atomic mineral and atomic energy.
2. Disinvestment: For disinvestment, the government adopted the following two methods.
- Selling-off a part of the equity of the PSU's: Under privatisation a large portion of the equity of the PSU's was sold to the private sector.
- Strategic sale of PSU's: Strategic sale of a number of companies such as Modern Foods India, Bharat Alluminium Company (BALCO), Maruti Udyog Ltd., etc. was undertaken.
3. Memorandum of Understanding (MOU): Under this, the PSU's were given clear targets and for achieving the targets these PSU's were given autonomy in the decision making process. Based on their performance, the PSU's were rated as excellent, very good, good and fair.
4. Navratna Policy: To improve efficiency, to infuse professionalism and to enable PSUs to compete effectively in the market, government awarded the status of ‘Navaratnas’ to the following nine high-performing PSUs.
- Indian Oil Corporation Ltd. (IOCL)
- Bharat Petroleum Corporation Ltd. (BPCL)
- Hindustan Petroleum Corporation Ltd. (HPCL)
- Oil and Natural Gas Corporation Ltd. (ONGC)
- Steel Authority of India Ltd. (SAIL)
- India Petro-chemicals Corporations Ltd. (IPCL)
- Bharat Heavy Electricals Ltd. (BHEL)
- National Thermal Power Corporation (NTPC)
- Videsh Sanchar Nigam Ltd (VSNL)
Later, GAIL (Gas Authority of India Limited) and MTNL (Mahanagar Telephone Nigam limited) were also awarded the status of 'Navratna'.