Chapter : 4. Globalisation and the Indian Economy


Trade Barriers :
It refers to the various restrictions which are used by the government to increase or decrease foreign trade. e.g. tax on imports.
The Indian government, after independence has put many such barriers to foreign trade and foreign investment. This was considered due to the following reasons.
1. All the basic industries required huge investment which was beyond the reach of private sector. So all these industries were developed under public sector.
2. Government wanted to control basic industries because it was felt that the government control of critical industries would provide necessary resources to under take development activities in different segment of the economy.
3. The private sector was allowed to establish industries and business enterprises, but was subject to controls and regulations that came in the form of laws. This was considered necessary so that resources and wealth would not get concentrated in a few hands.
4. The main purpose behind the mixed economy strategy was to eliminate poverty, inequalities in the distribution of income and wealth, unemployment and to achieve economic growth and social justice.
Liberalisation :
Removing barriers or restrictions set up by the government is known as liberalisation.
In 1991 it was decided to lift all the unwanted restriction such as industrial licensing system, price control, import license etc.
For this following steps were taken :
1. All the industries except three industries were exempted from any kind of industrial licensing.
2. Under the policy of liberlisation industries are free to expand and produce according to the need of market.
3. Now the producers are free to import the machinery and raw material from abroad.
4. Now the industries are also free to import modern technology from other countries.

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