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Meaning, Advantages and Disadvantages of Liberalization

July 23, 2022
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Meaning, Advantages and Disadvantages of Liberalization
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MEANING

Meaning of Liberalization

Simply put, liberalization refers to relieving businesses of heavy restrictions and controls from the government. Accordingly, a private business can decide on its own on Price, Production, Lending, etc. based on its needs.

ADVANTAGES

ADVANTAGES OF LIBERALIZATION

  1. Increase in foreign direct investment
  2. Di-licencing of industries
  3. Improves the standard of life
  4. Transfer of foreign technology
  5. Faster growth and poverty reduction

Increase in FDI (Foreign direct investment) : Removing this statute makes it easier for enterprises to accept investments from international investors promptly and freely. This aids in business growth. Depending on the industry, foreign investors may currently contribute up to 49% of their capital to a company as the owner of the business should remain in the hands of the nation’s active citizens.

Di-licensing of industries : Di-licensing of industries denotes the removal of excessive restrictions on rules and industry licenses by the government. The delayed license application process was eliminated by liberalization. It makes it easier for people to start new businesses in that sector, which benefits the economy by boosting competition and the productivity of the country.

Improves the standard of life : The business can establish an industrial site anywhere it can operate successfully by eliminating needless regulations. As previously, getting government approval to establish an industry in a different location takes a long time. It is advantageous for locals to also have a high level of living, employment, and advancement.

Transfer of foreign technology : Due to the implications of this, the amount of foreign technology being imported to run the organization both successfully and efficiently will be rising. For instance, companies can produce items more affordably and with higher quality.

Faster growth & Poverty reduction : The country’s ability to grow quickly and create more jobs is also aided by the increase in export and import. This causes the poverty rate to decline.

Disadvantages

Disadvantage Of Liberalization

  1. Loss in the domestic unit
  2. Unbalanced economy
  3. Technology Impact
  4. Increase Dependence

Loss in the domestic unit : Increased overseas trade makes the country more reliant on imported technology and raw materials because they are so inexpensive from places like China and other developing nations. Nobody likes to purchase costly domestic products, hence it results in a loss for the domestic unit.

Unbalanced Economy : Since liberalization makes the economy dependent on other nations, any fluctuations in the foreign economy also cause fluctuations in the domestic economy.

Technology Impact : Due to the rapid developments in technology, many entrepreneurs have trouble keeping up with changes and updating technology. Additionally, employees find it challenging to adopt new technology.

Increase Dependence : The nation becomes more dependent on foreign technology, raw commodities, etc. as a result of the growth in international trade. A trade ban, for example, may result in a crisis of hunger and a catastrophic loss of revenue for a nation that depends on it. It’s because they depend entirely on other countries.

 

 

 

 

 

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