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Class 11 Liberalisation, Privatisation and Globalisation: cheat sheet
CBSE Social Science. The 1991 reforms explained: liberalisation, privatisation and globalisation, the reforms in industry, finance, tax, foreign exchange and trade, outsourcing and the WTO.
Key ideas
- Liberalisation removes restrictions and opens up sectors; privatisation sheds government ownership or management; globalisation joins the economy to the world economy.
- Stabilisation measures are short-term (balance of payments, inflation); structural reforms are long-term (efficiency, competitiveness).
- Industrial licensing was abolished for most products, and many small-scale goods were dereserved.
- In finance, private Indian and foreign banks were allowed and foreign institutional investors could invest; taxes were simplified and GST later created one national market.
- The rupee was devalued in 1991, and its value was later left more to the demand and supply of foreign exchange.
- Outsourcing hires services such as call centres or accounts from outside, often from India.
- The WTO (1995), successor to GATT (1948), runs a rule-based trading system and works to lower trade barriers.
Remember
| After a devaluation | extra rupees paid = dollar value × (new rate − old rate) |
| Months of imports covered | reserves ÷ monthly imports |
| Disinvestment raises | shares sold × price per share |
| Price with a tariff | price × (100 + tariff) ÷ 100 |
| Direct or indirect tax | income and corporation tax: direct; GST, customs and excise: indirect |
| PSU grades | Maharatna, Navratna and Miniratna |
| Change in growth rate | difference in percentage points: later − earlier |
Watch out
- Mixing up disinvestment (selling part of the equity) with devaluation (lowering the rupee).
- Calling GST a direct tax.
- Giving a change in growth rates as a per cent instead of percentage points.
Worked example
An exporter sells goods worth $47,900. How many rupees does the exporter get at ₹41 per dollar, and at ₹61 after a devaluation?
Working: 47,900 × 41; 47,900 × 61
Answer: ₹1,963,900 and ₹2,921,900, i.e. ₹958,000 more
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