Liberalisation, Privatisation and Globalisation: An Appraisal

India introduced economic reforms in 1991 because the country faced a serious economic crisis. The government could not repay its external debt, foreign exchange reserves had fallen to a very low level, imports were rising faster than exports, and prices of essential goods were increasing. To manage this crisis and improve the economy, a new set of policy measures called the New Economic Policy was introduced.

It is necessary to become a member of the WTO because it provides a rule-based trading regime. Membership helps a country get better access to world markets, take part in international trade on equal terms, and benefit from the reduction of tariff and non-tariff barriers. The WTO also works to ensure optimum use of world resources and to promote fair trade among countries.

The RBI had to change its role because one aim of financial sector reforms was to reduce the RBI’s role from a controller to a facilitator. The idea was to allow the financial sector to take more decisions on its own, encourage competition, and make the sector more efficient. The RBI still keeps some important controls to protect the interests of depositors and the nation.

The RBI controls commercial banks by regulating important banking functions. It decides the amount of money banks must keep with themselves, fixes interest rates, and regulates the nature of lending to different sectors. It also gives permission for opening new branches in certain cases and keeps some managerial control to safeguard the interests of account-holders and the nation.

Devaluation of the rupee means reducing the value of the rupee in relation to foreign currencies. In 1991, as an immediate step to resolve the balance of payments crisis, the rupee was devalued to increase the inflow of foreign exchange.

In strategic sale, the government sells a significant part of its equity and also transfers management control. In minority sale, the government sells only a small part of its equity, while control generally remains with the government.

Bilateral trade means trade between two countries. Multilateral trade means trade among many countries, usually under a common set of rules.

Tariff barriers are restrictions created by imposing taxes or duties on imports. Non-tariff barriers are restrictions other than taxes, such as quotas, import licensing, and other controls on trade.

Tariffs are imposed to protect domestic industries from foreign competition and to raise revenue for the government. By making imported goods costlier, tariffs encourage people to buy locally produced goods and help domestic producers grow.