Page 113 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 10: Critique of Indian Economy Policies—Pre and Post Reforms

since workers’ personal interest is linked to the interest of the enterprise, the workers are likely Notes
to work hard to increase productivity so that they can earn more. For example, in Kamani
Tubes, Central Jute and Mewar Textiles, Hoist O’ Mech and Kolkata Chemicals etc these schemes
were introduced. However, this form of privatisation did not assume a significant role in reforms.
(d) Token Privatisation : It is also referred to as ‘deficit privatisation’ which means the sale of 5%
or 10% shares of a profit-making public sector enterprise in the market with the objective of
obtaining revenue to reduce budget deficit. Similarly, it has also been called ‘disinvestment’ as
Finance Ministers used to set targets for disinvestment during a year.
Among the above, the most acceptable form of privatisation is the joint venture in which the
share of the private sector is kept at either 49% or 74%. However, other supporting measures
such as linking wages to productivity, changing promotion policy and changing the organisation
culture of the enterprise are significant factors in creating a competitive environment.
Globalisation to Integrate the Indian Economy with the World Economy : The process of integrating
the various economies of the world without creating any hindrances in the flow of goods and services,
technology, capital and even labour or human capital is called gloalisation. Globalisation has many
meanings depending on the context and on the person who is talking about. Though the precise
definition of globalisation is still unavailable a few definitions are worth viewing, Guy Brainbant :
says that the process of globalisation not only includes opening up of world trade, development of
advanced means of communication, internationalisation of financial markets, growing importance
of MNCs, population migrations and more generally increased mobility of persons, goods, capital,
data and ideas but also infections, diseases and pollution. The term globalisation refers to the
integration of economies of the world through uninhibited trade and financial flows, as also through
mutual exchange of technology and knowledge. Ideally, it also contains free inter-country movement
of labour. In context to India, this implies opening up the economy to foreign direct investment by
providing facilities to foreign companies to invest in different fields of economic activity in India,
removing constraints and obstacles to the entry of MNCs in India, allowing Indian companies to
enter into foreign collaborations and also encouraging them to set up joint ventures abroad; carrying
out massive import Liberalisation programmes by switching over from quantitative restrictions to
tariffs and import duties, therefore globalisation has been identified with the policy reforms of 1991
in India. In fact, globalisation is an extension of the process of liberalisation in the international
domain.
Role of the Public Sector
Redefining the Role of the Public Sector : In order find a solution to the problems of the public
sector, the Government adopted a new approach towards it. We can see the main elements of the
new approach to be the following :
(i) The Government decided to progressively reduced budgetary support to public enterprises;
(ii) Market discipline for PSUs, competition from the private sector, and disinvestment of part of
the equity in selected enterprises;
(iii) To avoid areas where social considerations were not paramount or to invite the private sector
where it would be more efficient than PSUs;
(iv) Greater managerial autonomy to enterprises in areas where continued public sector involvement
was found appropriate;
(v) Long time sick public enterprises not be allowed to incur heavy losses to the exchequer.
The following measures were taken in the light of the new approach :
(a) Chronically sick PSUs and unlikely to be redeemed referred to the Board for Industrial and
Financial Reconstruction (BIFR) for rehabilitation or restructuring.
(b) Industries reserved for the public sector was reduced from 17 to 8.
(c) Disinvestment of upto 20% of Government equity in selected public enterprises.
(d) Monitoring was strengthened with primary emphasis on profitability and rate of return to the
enterprise.

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