LPG : LIBERALIZATION,PRIVATIZATION,GLOBLIZATION

Introduction to LPG :

 LPG stands for Liberalization, Privatization, and Globalization. India under its New Economic Policy approached International Banks for development of the country. These agencies asked Indian Government to open its restrictions on trade done by the private sector and between India and other countries.

In the late 1980s, government expenditure began to exceed its revenue by such large margins that meeting the expenditure through borrowings became unsustainable. Prices of many essential goods rose sharply. Imports grew at a very high rate without matching the growth of exports. As pointed out earlier, foreign exchange reserves declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that needed to be paid to international lenders. Also, no country or international funder was willing to lend to India.

India approached the International Bank for Reconstruction and Development (IBRD), popularly known as World Bank and the International Monetary Fund (IMF), and received $7 billion as loan to manage the crisis. For availing the loan, these international agencies expected India to liberalise and open up the economy by removing restrictions on the private sector, reduce the role of the government in many areas and remove trade restrictions between India and other countries.

So, the government initiated a variety of policies that fall under three heads viz., liberalisation, privatisation and globalisation.

 LIBERALISATION :

The objective of liberalisation was to put an end to those rigidities and restrictions that were acting as a hindrance to the growth of the country. Further, in this approach, the Government was expected to be flexible with its regulation in the nation. 

The objectives of this policy were to enhance the competition among the domestic industries and encourage international trade with planned imports and exports. Moreover, it aimed at increasing international technology and capital. Also, this policy was expected to expand the international market frontier of the nation and reduce the burden of debt in the country.

PRIVATISATION :

The second policy of the stabilisation measure is privatisation. This policy aims to expand the domination of private sector companies and reduce the control of the public sectors. Thus, the Government-owned enterprise will have less ownership. Besides these Government companies can be converted into private sector companies with two approaches. These approaches are by withdrawing the control of the Government in the public sector company and by disinvesting. There are three forms of Privatisation which are a strategic sale, partial sale, and token privatisation. In the strategic sale or denationalisation, the Government needs to deliver 100% of productive resources ownership to the owners of the private companies. 

The Partial Sale or Partial privatization owns a minimum of 50% ownership with the help of the transfer of shares. They would, therefore, own the majority of the shares and would have control of the autonomy and functioning of the company. In the token or the deficit privatisation, the Government would have to disinvest the share capital by up to 5-10% in order to meet the shortage in the budget. This policy, therefore, aims to improve the financial situation in the country and reduce the work pressure of the public sector companies. Moreover, funds could be raised from the disinvestment. With the reduced work pressure the efficiency of the public sector would automatically increase and yield better quality of goods and services for the use of consumers.

GLOBALIZATION :

In this policy, the country's economy is expected to grow with the help of the global economy. This means that the primary focus would be on foreign trade and institutional and private investments. It is the third and the last policy that is to be implemented. The objective of this phenomenon is to develop and independent the world with the implication of suitable strategies. It is the attempt to create a world where the requirements of one country can be driven and turned into one large economy. One of the major outcomes of Globalisation is outsourcing. 

Outsourcing means an enterprise can employ professionals from other countries to reach a particular goal. There is a lot of contractual work that is being outsourced in the field of Information Technology leading to its development. This has opened new avenues for a lot of private sectors and Indian skills are regarded as the most effective and vibrant across the globe. The low wage rate and dedicated employees have made India one of the constructive nations suitable for international outsourcing.

CONCLUSION; 

 Liberalisation: Liberalisation of the economy means its freedom from direct or physical controls imposed by the government.

Privatisation: It is the general process of involving the private sector in the ownership or operation of a state-owned enterprise.

Globalisation: It is a process associated with increasing openness, growing economic interdependence and deepening economic integration in the world economy.

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