Revision Notes for CBSE Class 11 Indian Economic Development Chapter 3 - Free PDF Download
In this particular topic, students will learn how the Indian economy was liberalised and opened for foreign investment. This story of what went before and what went during this process is discussed in detail. Also, how these policies were brought in is discussed. Students looking to understand what the pre-1980 situation was, as well as how that impacted the Indian economy today should get adequate answers from this chapter.
Refer to Vedantu’s Indian economic development chapter 3 notes for a close and illustrative look into the topic. The chapter is both informative as well as engaging.
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Access Class 11 Economics (Indian Economic Development) Chapter 3 – Liberalisation, Privatisation and Globalisation
Economic Policy of 1991
In 1991, in an attempt to battle the severe economic crisis, the Government of India initiated a series of economic reforms called the New Economic Policy.
India announced the New Economic Policy (NEP) subject to the conditionalities of the World Bank and IMF. Broad classification of this policy is:
Stabilisation measures: These were the short term measures to correct issues such as inflation, and deficit in balance of payments.
Structural reform measures: These were long term measures that focused upon enhancing the international competitiveness, and efficiency of the economy.
The three major components of this policy were:
In India, economic reforms were implemented for the following reasons:
Decreasing Foreign exchange reserves: Foreign exchange reserves, which the government usually has in hand to import gasoline and other essentials, plummeted to levels that were insufficient to last even a fortnight. The government was unable to repay its foreign borrowings.
Poor performance of the public sector: During the period 1951–1990, the public sector was given a significant role in development policies. However, the majority of government enterprises performed poorly. They were losing a lot of money because of ineffective management.
Inflationary BoP or imports exceeding exports: Imports increased at a rapid pace, but not at the same rate as exports. Even after establishing high taxes and quotas, the government was unable to limit imports. Exports, on the other hand, were quite low due to the bad quality and high pricing of our items in comparison to foreign commodities.
Government has massive debts: The government's investment on different developmental projects exceeded its earnings from taxation. Therefore, the public authority acquired cash from banks, public and global financial organisations such as the International Monetary Fund (IMF) and other sources.
The independence of the economy from direct or physical constraints imposed by the government is referred to as liberalisation. It is commonly defined as the relaxation of government regulations in a country to allow private sector enterprises to conduct business activities with fewer limitations. This refers to the opening of economic boundaries for multinational and foreign investment in emerging countries.
Various liberalisation measures were taken in respect to foreign trade, technological upgradation, exports-imports and foreign investment.
Industrial Sector Reforms
Under these reforms, the requirement of licensing was abolished except for five industries
industrial explosives, and
The number of industries earmarked for the government has been cut from 17 to 8. In 2010-11, the number of these was reduced to 2.
Many production areas which earlier were reserved for small-scale industries were now de-reserved.
The absence of licencing implies the absence of capacity limits.
The producer could now decide what to produce and how much to produce.
Financial Sector Reforms
RBI’s role was transformed from a regulator to a facilitator of the financial sector.
As a regulator, the RBI would fix the interest structure for commercial banks. But as a facilitator, it would only facilitate the free play of the market forces and let the banks decide their interest rates.
Indian financial markets were also open to Foreign Institutional Investors (FII), like merchant bankers, mutual funds, and pension funds.
Tax Reforms (Fiscal Reforms)
There has been a reduction in the taxes and simplification of the structure of taxes on individual incomes since 1991. Fearing a heavy burden and complex nature of taxes, people would often evade taxes.
Reforms have also been made in taxes levied on commodities. The Goods and Services Tax which was passed in 2016 and came to effect in 2017, was expected to generate additional government revenue and prevent tax evasion.
Foreign Exchange Reforms
In 1991, the Indian rupee was devalued against foreign currencies to fix the balance of payment imbalance.
Followed by the devaluation, the exchange value of the Indian rupee in the international money market was left to the free play of market forces.
Trade and Investment Policy reforms
After liberalization, import quotas prevalent in the Foreign Trade Policy were removed.
Reduction in tariff rates were made.
The policy of import licensing was almost scrapped except in the case of a few goods.
There was a reduction of import duty to enhance competitiveness in the domestic market.
Export duty was withdrawn to enhance the competitiveness of Indian goods in the international market.
From April 2001, quantitative restrictions on imports have been removed.
It refers to the process of involving the private sector in the ownership of the state-owned enterprise.
The transfer of government ownership to the public sector can take place in two ways:
Outright sale of the government enterprises to private entrepreneurs
Withdrawal of government ownership and management from the mixed enterprises.
Disinvestment is also a type of privatisation where the government sells off a part of its share of the capital of PSUs to private investors.
Strategies Adopted for Privatisation:
Providing a strong impetus for FDI inflows: Privatisation strives to provide a solid foundation for FDI inflows. Increased FDI inflows strengthen the economy's financial position.
Increasing the efficiency of public-sector endeavours (PSUs): Giving PSUs decision-making authority increases their efficiency. Some businesses were accorded the Navratna and Miniratna designations.
It refers to the integration of a country’s economy with the global economy.
Some of the features of globalisation are a follows:
Liberalisation: It represents the freedom of entrepreneurs to develop any industry, trade, or business enterprise, whether within or outside of their own country.
Economic Activity Globalization: Domestic markets, as well as the global market, govern economic activity. It refers to the process of merging the domestic and global economies.
Trade liberalisation: It advocates for the unrestricted flow of trade between all nations. It advocates for industry and commerce to be free of overbearing regulatory and protective laws and restrictions.
Privatisation: Globalisation implies removing the state from control of means of production and distribution and allowing free movement of industrial, commercial, and economic activities among individuals and companies.
Increased Collaborations: One characteristic of globalisation is the encouragement of entrepreneurial collaborations in order to ensure fast modernisation, development, and technical improvement.
This outcome of globalization refers to a system of hiring business services from the outside world.
These services can include call centers, transcription, clinical advice, teaching/coaching, BPOs, KPOs, accounting, banking services etc.
India is becoming an important destination to outsource because of the availability of cheap labour and revolutionary growth in the IT industry in India thus making India a destination for global outsourcing.
World Trade Organisation
On January 1, 1995, the organisation GATT was replaced by the World Trade Organization. Its headquarters are in Geneva, Switzerland.
It is also a member-driven rule-based organisation, in that all decisions are made by member states based on a general consensus.
The World Trade Organisation (WTO), is expected to play an important role in the globalisation of world economies. It is intended to encourage international trade by lowering tariffs and eliminating non-tariff barriers.
Assessment of LPG Policies
The Indian economy has become a more vibrant economy. The overall level of economic activity has trended up as indicated by an impressive increase in the growth rate of GDP. Following the implementation of LPG policy, GDP growth reached as high as 8% per year.
Rise in FDI:
There has been a substantial rise in foreign direct investment (FDI) and foreign institutional investment (FII). The foreign exchange reserves have also shown considerable growth. As a result, India is now one of the largest foreign exchange reserve holders in the world.
India has emerged as a leading exporter of a variety of goods like auto parts, pharmaceutical goods, engineering goods, IT software and textiles.
A check on Inflation:
Owing to a greater flow of goods and services in the economy, LPG policies brought a check on inflation.
The growth-led reforms failed to generate sufficient employment opportunities in the country.
Reforms in Agriculture
The growth of GDP has primarily been triggered by the growth of secondary and tertiary sectors. The agricultural sector has suffered serious neglect and its growth rate has depleted to a miserably low level. As a result, India is experiencing a growing disparity between its rural and urban economies.
Reforms in Industry
Due to decreasing demand for industrial products, industrial growth has recorded a slowdown. The decreasing demand can be due to cheaper imports, inadequate investment in infrastructure, etc. The opening up of the economy has imposed increasing competition from imports on domestic manufacturers and the infrastructure remains inadequate.
There has been a substantial loss to the government and the outright sale of public assets because the assets of PSUs have been undervalued and sold to the private sector. Instead of being used to develop the social infrastructure of the country, the proceeds from the sale of such assets are used to offset the shortage of government revenues.
Reforms and Fiscal Policies
The growth of public sector expenditures has been limited by economic reforms, especially in the social sectors. The tax reductions were expected to curb tax evasion and increase government revenue, but no increase in tax revenue was witnessed. To entice foreign investment, tax breaks were offered to international investors. This further reduced the scope for increasing tax revenue.
Economics Class 11 Chapter 3 Notes Liberalisation, Privatisation and Globalisation - An Appraisal
For students who want an easy manual to revise from, Vedantu has created useful revision notes. These notes are both straightforward as well as concise in their explanation of the various topics. They clearly depict the causes and the need for an excellent liberal economic policy.
Economics chapter 3 class 11 notes is a student’s best friend since it is free, easy to download and ultimately created with the help of experts. Several conceptual errors can be easily trapped when students utilise these notes. In Vedantu’s notes regarding this chapter students will find these topics easy to understand as well as explained as thoroughly as possible.
Microeconomics Class 11 Chapter 3 Notes: Economic Crisis
In this section, these notes explain exactly what had happened before the 1980 crisis. Also, it tries to understand what created the need for liberalisation. It discusses these causes of economic crisis, this need for economic reforms, and points that led to economic reforms.
Microeconomics Class 11 Chapter 3 Notes: Emergence of New Economic Policy
This section discusses this need to liberalise the Indian economy and discusses how it was done. These reasons behind India’s decision to open up the economy is elaborated here.
Microeconomics Class 11 Chapter 3 Notes: Liberalisation
Notes of economics class 11 chapter 3 explain in short what is liberalism, what are its objectives, what are these various reforms undertaken in this Liberalisation process.
Microeconomics Class 11 Chapter 3 Notes: Economic Reforms
Chapter 3 economics class 11 notes discuss this economic deregulation of the industrial sector. Other topics that are talked about include reforms of the financial sector, tax regime, foreign exchange reforms, policy regarding internal and external trade and investment, etc.
Microeconomics Class 11 Chapter 3 Notes: Privatisation
Definition and meaning of privatisation are elaborated.
Class 11 Economics Ch 3 Notes: Globalisation
Next these notes go on to explain the nature and meaning of what is globalisation and outsourcing. Even the importance of the World Trade Organisation is discussed in detail.
Ch 3 Economics Class 11 Notes: Economic Growth During Reforms
These main points behind the need for economic growth during reforms are explained and also highlighted are what were the observable changes during this period.
Class 11th Economics Chapter 3 Notes: Economic Reforms Failures
What are the various failures once these economic reforms were inducted? This topic is discussed in a simplified manner, and that concludes what these notes hold for us.
FAQs on Liberalisation, Privatisation and Globalisation: an Appraisal Class 11 Notes CBSE Economics Chapter 3 (Free PDF Download)
1. What were some of the more significant causes of the Indian economic crisis?
Indian economic crisis created in the 1980s was because of a debt trap in which the government of that day found itself. Excessive spending on welfare reforms was not creating any income for the government. Even the taxation process was unable to generate funds for use. Also, the government tried spending a lot on defence and agriculture, but that did not generate much income. Overall all these factors combined resulted in the economic crisis of the 1980s. To gain more knowledge and understand this topic more proficiently utilise notes of chapter 3 economics class 10.
2. What was the need for the economic reforms in the country?
The major need for financial reforms in the country was growing fiscal deficit. The government at that time did not have sufficient money to pay up its bills and was increasing in debt. To add to this, there was a growing rise in prices which was causing problems for the common man. In the end, the government had to appeal to the IMF (International Monetary Fund) for a loan of seven million dollars. In exchange, it decided to liberalise the economy. More details on this topic are discussed in full in notes of chapter 3 economics class 11.
3. What was the objective of liberalisation of the Indian economy?
Prior to the 1980s, the government was facing a tremendous financial crisis. The fiscal deficit was at all time high, so were the prices. In exchange for a seven million dollar loan, the government agreed to carry out the policy of liberalisation which would open up the country to a lot of foreign investment. Therefore the government carried out liberalisation procedures to increase competition in the domestic market, develop technology and increase foreign investment and widen the boundaries of the market. With these objectives in mind, the government set about trying to liberalise the economy and create a lot of foreign direct investment. For a better understanding of the subject, students can refer to microeconomics class 11 chapter 3 notes.
4. What is Liberalisation, Privatisation and Globalisation?
The Indian government has adopted three major measures under the New Economic policy and aided the help of the international banks for the development of the country.
Liberalization - Liberalization is a process where the government lifts some of the restrictions imposed or loosening of the government control on private individual activities.
Privatization - Privatization is a process where the ownership of some public sectors is transferred to private sectors.
Globalization - Globalization is defined as the assimilation between countries through foreign investment and trade by multinational corporations.
5. What is LPG in Economics Class 11?
The word LPG stands for liberalization, privatization, and globalization. These were the three measures taken by the government of India for the New Economic Policy. To maintain this policy, the government of India approached the International banks for the betterment of the economy and the development of the country. To prepare for this chapter for the exam, the students should download the free PDF of revision notes designed by the experts at Vedantu in a simple and understanding manner.
6. What is liberalization in Economics Class 11?
Liberalization in the economy refers to the lessening of government rules or relaxations of some government regulations for the greater participation of government sectors that benefit the growth and development of the country’s economy. Vedantu offers the best revision notes for the students to assist them in the exam preparation process. Download the PDF of Chapter 3 revision notes available at Vedantu to learn more about liberalization and ace the Class 11 Economics exam.
7. What are the main features of economic reforms Class 12?
There are seven main features of economic reforms. They are:
New public sector policy
When it comes to preparing for this chapter, students are advised to make notes of important points and topics which will later help them. The easiest and best source that provides revision notes is the Vedantu website. These revision notes are prepared by the experts to make the learning process easy for the students.
8. How to download the revision notes for Economics Class 11?
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