Class 12 Economics - KERALA
Liberalisation Privatisation and Globalisation
This chapter explores the New Economic Policy (NEP) introduced in India in 1991 to overcome the severe balance of payments crisis. It breaks down the three pillars of reforms: Liberalisation (freeing the economy from unnecessary controls), Privatisation (transferring ownership from public to private sector), and Globalisation (integrating the domestic economy with the world economy). For Class 12 Kerala SCERT board exams, this chapter is extremely high-scoring and critical, frequently featuring questions on the rationale behind 1991 reforms, arguments for and against outsourcing, WTO functions, and the distinction between Navratnas and Mini-ratnas.
Start Learning FreeKey Concepts
New Economic Policy (NEP) 1991
A set of economic reforms introduced by the Government of India in July 1991, comprising stabilization and structural adjustment measures to rescue the economy from crisis.
Liberalisation
The process of removing unnecessary government restrictions, licenses, and controls on private sector enterprises to promote market competition and efficiency.
Privatisation
The shedding of ownership or management of a government-owned public sector enterprise (PSE) to the private sector through disinvestment or outright sale.
Globalisation
The integration of the national economy with the world economy through the free flow of goods, services, technology, capital, and labor across international borders.
Outsourcing
A business practice where companies hire regular service providers from outside, often from developing countries like India, to perform routine business processes like BPO and KPO.
World Trade Organisation (WTO)
Established in 1995 as the successor to GATT, it acts as a global rule-making body for international trade and administers trade agreements among member nations.
Important Formulas
Board Exam Info
In the Kerala (SCERT) Class 12 Economics board examination, this chapter typically carries around 8 to 12 marks. Common question types include direct essay questions on the need for 1991 reforms, short-answer questions explaining the difference between tariff and non-tariff barriers, brief notes on outsourcing and WTO, and analytical questions regarding the pros and cons of globalisation.
Frequently Asked Questions
What were the main reasons for the introduction of economic reforms in 1991?
The primary reasons included a severe balance of payments crisis, mounting fiscal deficit, high inflation rates, depletion of foreign exchange reserves down to barely two weeks of imports, and poor performance of Public Sector Undertakings (PSUs).
What is the difference between outsourcing and globalization?
Outsourcing is a specific business practice where a company contracts out its internal business functions to external agencies (often overseas), whereas globalization is a broader phenomenon of total economic, cultural, and political integration between countries.
What is disinvestment and why did the government adopt it?
Disinvestment is the process where the government sells a part or whole of its equity shares in Public Sector Enterprises (PSEs) to private investors. It was adopted to raise financial resources, reduce public debt, improve managerial efficiency, and encourage private sector participation.
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