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    Eco Project Chapter 5

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    Sanket Kumar
    Liberalization has had both positive and negative impacts on the Indian economy. Positively, it improved capital flows and lowered costs, increased stock market performance, reduced political risks for investors, and allowed more diversification. However, it also destabilized the economy, reduced government stakes in banking and insurance, increased threats from multinational corporations, forced technological changes that hurt some industries, and led to mergers and acquisitions that required expensive re-training of employees. The impact on agriculture has been complex with some changes in cropping but continued government intervention.

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    Eco Project Chapter 5

    Uploaded by

    Sanket Kumar
    168 views2 pages
    Liberalization has had both positive and negative impacts on the Indian economy. Positively, it improved capital flows and lowered costs, increased stock market performance, reduced political risks for investors, and allowed more diversification. However, it also destabilized the economy, reduced government stakes in banking and insurance, increased threats from multinational corporations, forced technological changes that hurt some industries, and led to mergers and acquisitions that required expensive re-training of employees. The impact on agriculture has been complex with some changes in cropping but continued government intervention.

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    ECO PROJECT CHAPTER 5

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    Liberalization has had both positive and negative impacts on the Indian economy. Positively, it improved capital flows and lowered costs, increased stock market performance, reduced political risks for investors, and allowed more diversification. However, it also destabilized the economy, reduced government stakes in banking and insurance, increased threats from multinational corporations, forced technological changes that hurt some industries, and led to mergers and acquisitions that required expensive re-training of employees. The impact on agriculture has been complex with some changes in cropping but continued government intervention.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    168 views2 pages

    Eco Project Chapter 5

    Uploaded by

    Sanket Kumar
    Liberalization has had both positive and negative impacts on the Indian economy. Positively, it improved capital flows and lowered costs, increased stock market performance, reduced political risks for investors, and allowed more diversification. However, it also destabilized the economy, reduced government stakes in banking and insurance, increased threats from multinational corporations, forced technological changes that hurt some industries, and led to mergers and acquisitions that required expensive re-training of employees. The impact on agriculture has been complex with some changes in cropping but continued government intervention.

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    IMPACT OF LIBERALISATION ON INDIAN ECONOMY

    Positive impact of Liberalisation:-


    Free flow of capital: 

    Liberalisation has improved flow of capital into the country which makes it
    inexpensive for the companies to access capital from investors. Lower cost of
    capital enables to undertake lucrative projects which they may not have been
    possible with a higher cost of capital pre-liberalisation, leading to higher growth
    rates.

    Stock Market Performance: 

    Generally, when a country relaxes its laws, taxes, the stock market values also rise.
    Stock Markets are platforms on which Corporate Securities can be traded in real
    time.

    Political Risks Reduced: 

    Liberalisation policies in the country lessens political risks to investors. The


    government can attract more foreign investment through liberalisation of economic
    policies. These are the areas that support and foster a readiness to do business in
    the country such as a strong legal foundation to settle disputes, fair and enforceable
    laws.

    Diversification for Investors: 

    In a liberalised economy, Investors gets benefit by being able to invest a portion of


    their portfolio into a diversifying asset class.

    Impact on Agriculture: 

    In the area of agriculture, the cropping patterns has undergone a huge modification,
    but the impact of liberalisation cannot be properly measured. It is observed that
    there are still all-pervasive government controls and interventions starting from
    production to distribution for the produce.
    Negative Impact of Liberalisation:-
    Destabilization of the economy: 

    Tremendous redistribution of economic power and political power leads to


    Destabilizing effects on the entire Indian economy.

    Impact of FDI in Banking sector:

    Foreign direct investment allowed in the banking and insurance sectors resulted in
    decline of government’s stake in banks and insurance firms. 

    Threat from Multinationals: 

    Prior to 1991 MNC’s did not play much role in the Indian economy. In the pre-
    reform period, there was domination of public enterprises in the economy. On
    account of liberalisation, competition has increased for the Indian firms.
    Multinationals are quite big and operate in several countries which has turned out a
    threat to local Indian Firms.

    Technological Impact: 

    Rapid increase in technology forces many enterprises and small scale industries in
    India to either adapt to changes or close their businesses.

    Mergers and Acquisitions:

    Acquisitions and mergers are increasing day-by-day. In cases where small


    companies are being merged by big companies, the employees of the small
    companies may require exhaustive re-skilling. Re-skilling duration will lead to
    non-productivity and would cast a burden on the capital of the company.

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