Advantages and disadvantages of liberalization

Dear Student,

Liberalisation refers to the freedom of the economy from direct or physical controls (such as, industrial licensing, price control, import license) imposed by the government. It implies greater dependence on the market for making various economic decisions. In other words, it refers to a gradual move from a planned socialist economy towards a market economy.

Advantages of liberalisation:

a. The process has facilitated  greater connectivity, through MNC's, increased foreign investment, through international institutions like WTO, IMF etc.
b. It has facilitated by industrial reforms like removal of trade barriers, increased privatisation 
c. In gives encouragement to private sector thereby increasing efficiency
​d., It has brought about major overhauling of country's economic policies
e.  It provides 
greater choice for consumers, with a variety of goods and at cheap prices.
 d. Encourages  foreign investment,  has led to creating of Special economic zones to attract investments.
f. It has also enhanced economic growth rate.
g. It has made consumers as the main players in the market, companies in order to survive has to cater to best interests of the consumers
h. It has helped local producers which can now enter into joint production with foreign companies
i. Further many local industries can enter into successful collaboration with foreign companies
j. It has also brought about inflow of foreign capital.


a. It leads to closure of many domestic public sector companies
b. Price offered by the private firms at times cannot be afforded by an average consumers
c.  It has also increased the dependence of economy on private and foreign enterprises
d. Welfare motive is completely overlooked by private enterprises.
e. It has impacted small producers, shopkeepers and casual labourers
f. It has led to closure of many small  local companies


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