Liberalisation, Privatisation And Globalisation : An Appraisal

Question 57

Those public sector undertaking which are making profits should be privatised. Do you agree with this view? Why?


New Industrial policy has a new approach to public enterprises. Under this policy, only a few core industry groups are reserved for public sector.

During the initial stage of planning, public sector was justifiable because huge amount of investment was required in heavy and basic industries. The private enterprises did not possess that kind of resources. Those who argue for privatisation say that most of Public Sector Enterprises are incurring losses, they suffer from inefficiency and lack of accountability and are sick. These enterprises have not solved the problems which they were expected to solve. They have become problems themselves, so they should be privatized. Profit-making enterprises should not be privatized.

Question 58

What are the major factors responsible for the high growth of the service sector?


India has been benefitted from the process of economic reforms and liberalisation, the rate of economic growth is increasing. The rate of growth of GDP was 5.6% during 1981-82 to 1990-91. During this period, the rate of growth in service sector was 6.7%. After adopting the new economic policy while the growth rate was 6.4%, the growth rate in service sector was 8.2 percent. So it is clear that the liberalisation and privatisation policy are responsible for the fast growth rate in service sector. For the period 2002-07, the projected growth rate in service sector is 8.0%

Question 59

What is the main reason of decreasing public expenditure during the last decade?


During the last decade after adopting the new economic policy public expenditure is decreasing. Due to the wave of privatisation the government is not investing in public sector enterprises. The government has realised that they do not have the resources enough to invest in the public enterprises. So the private sector is being encouraged and allowed to operate in the areas reserved exclusively for the public sector. Several public sector enterprises have been sold during the period 1991-2005. Disinvestment policy is in process. That is why the public expenditure is decreasing.

Question 60

Can massive food grains stocks be fruitfully utilized?


High procurement prices give farmers the incentive to produce more. To support the high prices, the Food Corporation of India (FCI) has to buy more and stocks of food grains rise. The government has to finance the maintenance of the addition to stock. The massive food grain stocks with the government should be utilized for poverty alleviation programmes financed though investment in food stocks will help in increasing the supply of the food grains.

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