EDUindex News

EDUindex News


 In July 1999, the government of India introduced a new industrial policy, Liberalization Privatization and Globalization (LPG) as a pert of the economic reform. It focused on liberating the industry from the licensing system(liberalization), reducing the role of public sector in the economy and introducing private sector(privatization) and encouraging the foreign-private participation in the country for the growth of the economy(globalization).

The main objective of this policy was to increase the standard of living in the nation and growth of the economy. Also, the nation needed to be strongly independent and not making money from other countries. Therefore, the focus was to set-up strong industrial bases which had heavy industries.

Since, poverty, unemployment and inequalities in income and wealth was and still is a major problem in the nation, another goal was to reduce them by giving employment opportunities to as much of the population as possible so that their living standard could be raised.

Under this policy, many industries which were reserved under the public sector was de-reserved by the government since the focus was supposed to be on the private sector. In many cases, disinvestment was also taking place.

The policy opened up the opportunities for foreign capital investment. This increased the foreign participation percentage in the country and in a lot of cases, a 100% Foreign Direct Investment (FDI) was also permitted.

This automatically granted the permission by the government required for technology agreements with the foreign companies investing in our nation. A board namely Foreign Investment Promotion Board (FIPB) was set-up for the promotion as well channelization of foreign investment.

Economic policies by the government like fiscal and monetary policies, infrastructural factors, economic growth of the country, the mixed economy of the nation that allows to recognize both public and private sectors are some of the factors responsible for the new policy LPG.



It means freeing the businesses and industries in the nation from unnecessary controls and regulations. This was done through the following processes –

·       Abolishing the requirement of license in majority of the industries

·       Removing the restrictions on the movement of goods

·       Reducing the tax rates

·       Lifting up of unnecessary control over the economy

·       Simplifying the procedure of international trade

·       Making the foreign companies invest in our country



It basically means reducing the role f public sector in the economy and giving that power to the private sector instead. In order to execute, a lot of public sector enterprises were transferred to the private sector. This is called disinvestment. As a result, the government held less power and control over the public enterprises. If the government will not have more than 51% ownership of the public enterprises, then its rights an ownership will automatically be given to the private sector.



This means the adaptation of various successful policies around the world and integrating them towards the emergence of a global economy. Till 1999, the government followed the old policy of strict and attentive international trade due to the fear being captured again. This policy was to be changed. This was necessary so that the country won’t be secluded. It needed a great level of international socialization and interaction. A global economy will be boundary less with the following characteristics  

·       Free flow of imports and exports

·       Free flow of capital

·       Free flow of information and technology

·       Free movement of citizens across borders