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Earlier it was mandatory for any private individual or organization to seek permission from the government to start any industrial activity. There were a heavy rush and long queue before the window of the concerned government department to get a license. This system slowly gave rise to delays in getting the license. Government officials started taking bribes to clear files. Such corrupt practices brought a bad name to the government.
So in , the government decided to abandon the licensing system and allowed the interested individuals to start their industrial activity without any permission. However, permission is still required only in case of strategic industries such as medicine, defence equipment etc.
Privatization implies opening of the door of industrial activities to the private sector which was exclusively reserved for the public sector only except nuclear enemy and defence.
Since basic and heavy industries were strictly under the public sector there was no room for competition. The quality of product and services deteriorated due to lack of competition from other companies. As a result, the consumers were the major looser because they did not get quality products and the delivery system and other services were also very poor.
So the government decided to allow and encourage the entry of private sector in the areas earlier reserved for the public sector only. As a result, private sector entry was seen in telecommunication, civil aviation etc. It for the most part assists governments with setting aside cash and increment proficiency, where privately owned businesses can move products faster and all the more effectively. Globalization implies the progressions of thoughts, capital, products and individuals across various pieces of the world.
These streams can be thoughts moving starting with one piece of the world then onto the next, wares being exchanged across borders, etc. During globalization India connected her economy with the worldwide economy.
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These reforms were known as 'structural adjustments'. The government announced a New Economic Policy on July 24, This new model of economic reforms is commonly known as the LPG or Liberalisation, Privatisation and Globalisation model. The policy was intended to move towards higher economic growth rate and to build sufficient foreign exchange reserves. Liberalization removes state control over economic activities. It provides better autonomy to the businesses in decision-making without government interference.
It was assumed that the market forces of demand and supply would operate automatically to derive a better efficiency and economic health will recover. Internally, this was enacted by bringing reforms in the real and financial sectors and externally by releasing foreign exchange and trade from state governments grip.
Read more about liberalization here. It means withdrawing the ownership or management of a government enterprise. Government companies are converted into private companies in two ways. Privatization is the transfer of the control and ownership of businesses from the public sector to the private sector. It means a decline in the role of the government as the property rights shaft fro public to private. The public sector enterprises had been experiencing challenges, since planning, such as low efficiency, low profitability, growing losses, political interference, lack of autonomy, labour issues, etc.
Therefore, to address this situation government introduced privatisation in the economy. Conditions to be Met Before Privatisation-.
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