What is meant by 'liberalisation'?
Liberalisation refers to a range of economic policies initiated in India in the late 1980s that marked a shift from state-led development. It includes the privatisation of public sector enterprises, which involves selling government-owned companies to private companies. It also entails the loosening of government regulations on capital, labour, and trade.
Another term for these changes is marketisation, which means using market-based processes rather than government regulations to solve economic problems. This includes deregulation (relaxation or removal of economic controls), privatisation of industries, and removing government controls over wages and prices. Liberalisation also involves reduction in tariffs and import duties, making it easier for foreign goods to be imported and for foreign companies to set up industries in India.
Explanation
The textbook defines liberalisation as a comprehensive set of policy changes that began in the late 1980s. The answer covers all key aspects mentioned in the context: privatisation, deregulation, reduction in tariffs, and the broader concept of marketisation. The 3 marks are distributed as: 1 mark for defining liberalisation and mentioning its timeline, 1 mark for explaining privatisation and deregulation, and 1 mark for mentioning tariff reduction and marketisation.
Solution Steps
Step 1: Define liberalisation as a policy shift from state-led development initiated in late 1980s
Step 2: Explain key components - privatisation, deregulation, loosening of regulations
Step 3: Connect liberalisation to marketisation and mention reduction in tariffs and import duties