1. LIBERALIZATION,
PRIVATIZATION &
GLOBALIZATION

2. GLOBAL INTEGRATION & BUSINESS
ENVIRONMENT
 The economic environment of business in India has been
changing at a fast rate mainly due to the changes in the
economic policies of the government and also due to global
integration.
 At the time of independence, the Indian economy was basically
agrarian with a weak industrial base. To speed up the
industrial growth and solve various economic problems, the
government took several steps like state ownership on certain
categories of industries, economic planning, reduced role of
private sector, etc.
 The Government adopted several control measures on the
functioning of private sector enterprises.
The development can be discussed under three heads:
 Liberalisation
 Privatisation
 Globalisation

3. LIBERALISATION
Liberalisation refers to the process of eliminating unnecessary
controls and restrictions on the smooth functioning of business
enterprises. It includes:
 Abolishing industrial licensing requirement in most of the
industries
 Freedom in deciding the scale of business activities
 Freedom in fixing prices of goods and services
 Simplifying the procedure for imports and exports
 Reduction in tax rates
 Simplified policies to attract foreign capital and technology to
India

4. PRIVATISATION
 Privatization, which has become a universal trend, means transfer of
ownership and/or management of an enterprise from the public sector to
the private sector.
 It also means the withdrawal of the state from an industry or sector,
partially or fully. Another dimension of privatization is opening up of an
industry that has been reserved for the public sector to the private
sector. The objects are:
 To improve the performance of PSUs so as to lessen the financial burden
on taxpayers
 To increase the size and dynamism of the private sector, distributing
ownership more widely in the population at large.
 To encourage and to facilitate private sector investments, from both
domestic and foreign sources
 To generate revenues for the state
 To reduce the administrative burden on the state
 Launching and sustaining the transformation of the economy from a
command to a market model

5. BENEFITS OF PRIVATISATION
 It reduces the fiscal burden of the state by relieving it of the
losses
 Privatization enables the government to mop up funds
 Privatization helps the state to trim the size of the
administrative machinery
 It enables the government to concentrate more on the
essential state
The functions of privatization are as follows
 Accelerate the pace of economic developments as it attracts
more resources from the private sector for development
 It may result in better management of the enterprises
 Privatization may also encourage entrepreneurship
 Privatization may increase the number of workers and
common man who are shareholders.

6. GLOBALISATION
 India’s economic integration with the rest of the world was
very limited because of the restrictive economic policies
followed until 1991.
 Globalization has in fact become a buzzword with Indian firms
now and many are expanding their overseas business by
different strategies.
 Globalization may be considered at two levels viz. at the macro
level (i.e., globalization of the world economy) and at the micro
level (i.e., globalization of the business and the firm).
 Globalization of the world economy is achieved, quite
obviously, by globalizing the national economies. Globalization
of the economies and globalization of business are very much
interdependent.

7. REASONS FOR GLOBALISATION
 Faster communication, speedier transportation, growing
financial flows and rapid technological changes.
 To set up overseas production facilities.
 To find political stability.
 To get technology and managerial know-how.
 Companies often set up overseas plants to reduce high
transportation costs. Some companies set up plants overseas
so as to be close to their raw materials supply and to the
markets for their finished products
 The US, Canada and Mexico have signed the North American
Free Trade agreement (NAFTA), which will remove all
barriers to trade among these countries
 The creation of the World Trade Organization (WTO) is
stimulating increased cross-border trade

8. NEW MARKETS
 Growing global markets in services – banking,
insurance, transport.
 New financial markets - deregulated, globally linked,
working around the clock, with action at a distance in
real time, with new instruments such as derivatives.
 Deregulation of anti - trust laws and proliferation of
mergers and acquisitions.
 Global consumer markets with global brands