Liberalization, Privatization and Globalization

Dear Class 12 Samacheer Kalvi students, here are the text book solutions for Chapter 20, Liberalization, Privatization and Globalization in Commerce for your reference.

I. Choose the Correct Answers:

II. Very Short Answer Questions:

1. State the branches of New Economic Policy.

There are three branches  or dimensions of New Economic Policy. They are Liberalization, Privatization, and Globalization.

2. What is Privatisation?

Privatization is the process of transferring ownership of a business enterprise, agency or public service from the government to the private sector. It means permitting the private sector to set up industries which were previously reserved for the public sector.

3. Mention any two disadvantages of Liberalisation.

(1) Increase in unemployment: Trade liberalisation often leads to a shift in the balance of an economy. Some industries grow, some decline. Therefore, there may often be structural unemployment from certain industries closing.

(2) Loss to domestic units: With fewer entry restrictions, it has been possible for many entrants to make inroads into the country, which poses a threat and competition to the existing domestic units.

4. Give any two advantages of Globalisation.

(1) Increase in foreign collaboration: Globalisation increases foreign collaboration through various modes such as joint venture, merger, franchise, turn-key projects, etc.

(2) Expansion of market: The size and operation of business moves from local to national and from national to international.

III. Short Answer Questions:

1. What do you mean by Liberalisation?

Liberalization refers to laws or rules being liberalized, or relaxed, by a government. Liberalization means relaxation of various government restrictions in the areas of social and economic policies in order to make economies free to enter in the market and establish their venture in the country. Liberalizing trade policy by the government includes removal of tariff, subsidies and other restrictions on the flow of goods and services between countries. Liberalization is the result of New Industrial Policy which abolished the “License system” or “Licence Raj”.

2. State any three impacts on Globalisation.

(1) Multinational corporations (MNCs) can manufacture, buy and sell goods worldwide.
(2) Globalisation has led to a boom in consumer products market.
(3) The advent of foreign companies and growth in economy has led to job creation.

3. Write a short note on New Economic Policy.

NEP is commonly known as the LPG or Liberalisation, Privatisation and Globalisation model. Liberalization refers to laws or rules being liberalized, or relaxed, by a government. Privatisation means permitting the private sector to set up industries which were previously reserved for the public sector. Globalisation means the interaction and integration of the domestic economy with the rest of the world with regard to foreign investment, trade, production and financial matters.

IV. Long Answer Questions:

1. Explain  the advantages and disadvantages of liberalisation. (any 5)

Advantages of liberalisation

(1) Increase the foreign exchange reserve: Relaxation in the regulations covering foreign investment and foreign exchange has paved way for easy access to foreign capital.

(2) Increase in consumption: Liberalization increases the number of goods available for consumption within a country due to increase in production.

(3) Control over price: The removal of tariff barriers can lead to lower prices for consumers. This is a benefit for countries who are importers.

Disadvantages

(1) Increase in unemployment: Trade liberalisation often leads to a shift in the balance of an economy. Some industries grow, some decline. Therefore, there may often be structural unemployment from certain industries closing.

(2) Loss to domestic units: With fewer entry restrictions, it has become possible for many entrants to make inroads into the country, which poses a threat and competition to the existing domestic units.

2. What are the highlights of the LPG policy? (any 5)

The highlights of the Liberalisation, Privatisation and Globalisation Policy in India are:

(a) Introduction of new Foreign Trade Agreements
(b) Foreign Investment (FDI & FII)
(c) MRTP Act, 1969 (Amended)
(d) Deregulation
(e) Opportunities for overseas trade
(f) Steps to regulate inflation
(g) Tax reforms
(h) Abolition of License

Globalization and liberalization refer to relaxing social and economic policies which results in better integration with an economy and between nations. Globalization and liberalization both occur as a result of modernization. Globalization is the greater integration among countries and economies for trade, economic, social and political benefits. Liberalization generally refers to removal of restrictions; usually government rules and regulations imposed on social, economic, or political matters.