In July
1999, the government of India introduced a new industrial policy,
Liberalization Privatization and Globalization (LPG) as a pert of the economic
reform. It focused on liberating the industry from the licensing system(liberalization),
reducing the role of public sector in the economy and introducing private
sector(privatization) and encouraging the foreign-private participation in the
country for the growth of the economy(globalization).
The main
objective of this policy was to increase the standard of living in the nation
and growth of the economy. Also, the nation needed to be strongly independent
and not making money from other countries. Therefore, the focus was to set-up
strong industrial bases which had heavy industries.
Since,
poverty, unemployment and inequalities in income and wealth was and still is a
major problem in the nation, another goal was to reduce them by giving
employment opportunities to as much of the population as possible so that their
living standard could be raised.
Under this
policy, many industries which were reserved under the public sector was
de-reserved by the government since the focus was supposed to be on the private
sector. In many cases, disinvestment was also taking place.
The policy
opened up the opportunities for foreign capital investment. This increased the
foreign participation percentage in the country and in a lot of cases, a 100%
Foreign Direct Investment (FDI) was also permitted.
This
automatically granted the permission by the government required for technology
agreements with the foreign companies investing in our nation. A board namely
Foreign Investment Promotion Board (FIPB) was set-up for the promotion as well
channelization of foreign investment.
Economic
policies by the government like fiscal and monetary policies, infrastructural
factors, economic growth of the country, the mixed economy of the nation that
allows to recognize both public and private sectors are some of the factors
responsible for the new policy LPG.
LIBERALIZATION
It means
freeing the businesses and industries in the nation from unnecessary controls
and regulations. This was done through the following processes –
· Abolishing the requirement of license
in majority of the industries
· Removing the restrictions on the
movement of goods
· Reducing the tax rates
· Lifting up of unnecessary control
over the economy
· Simplifying the procedure of
international trade
· Making the foreign companies invest
in our country
PRIVATIZATION
It basically
means reducing the role f public sector in the economy and giving that power to
the private sector instead. In order to execute, a lot of public sector
enterprises were transferred to the private sector. This is called
disinvestment. As a result, the government held less power and control over the
public enterprises. If the government will not have more than 51% ownership of
the public enterprises, then its rights an ownership will automatically be
given to the private sector.
GLOBALIZATION
This means
the adaptation of various successful policies around the world and integrating
them towards the emergence of a global economy. Till 1999, the government
followed the old policy of strict and attentive international trade due to the
fear being captured again. This policy was to be changed. This was necessary so
that the country won’t be secluded. It needed a great level of international
socialization and interaction. A global economy will be boundary less with the
following characteristics –
· Free flow of imports and exports
· Free flow of capital
· Free flow of information and
technology
· Free movement of citizens across
borders
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