Market Liberalisation Success, Failures And Challenges

Despite this India is still a complicated place for foreign investors. A weak parliamentary government has very little purview over the provincial and local ministers who were elected entirely separate from federal elections. The fragmented nature of the country’s political system has and will continue to prevent major

After IMF and World Banks involvement India took steps towards liberalization and privatization to reform India’s economy. Lowered tariff levels, reformed exchange rate policy, liberalized industrial licensing policy and also relaxed India’s foreign direct investment (FDI) policy. These reforms opened the doors for multinational corporations to invest in India. India received positive responses from international investors. Before the 1991 reforms, foreign equity ownership was restricted to 40 percent and the transfer of technology was necessary to do business in India. These barriers were removed for foreign companies. Many multinational corporations (MNCs) took advantage of India’s new economic policies and increased their stakes to more than 51 percent in their subsidiaries resulting in a several fold increase in foreign direct investment in just three years (Gosai, 2013).

Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts to ensure equitable economic development.

When financial restrictions bring about nothing but deterioration the economy, the country will opt for a liberalisation to lessen government regulation and restriction in the financial market. Financial market liberalisation eliminates restrictions on financial institution and market domestically. This liberalisation strategy intends to free the flow of capital in and out of a country and encourage economic development. The purpose of removing restrictions on the market is to allow capital inflows from developed countries that would finance the emerging market to higher investment and growth, for insurance against shocks and volatile consumption, and spur development of domestic financial market. By lifting these financial restrictions, domestic financial market opens up to the international market allowing market forces to drive the market operation more effectively. In addition, it should achieve an efficient capital allocation and better sharing of individual risk. Emerging market economies generally refers to economies in an earlier stage of market development that have recently opened up to world. Emerging market nations liberalise their financial system with high hope of economic growth and reduced poverty. Their capability to manage a market liberalisation in order to enjoy its anticipated benefits is questionable. Being far from a developed country, emerging

When India got independence in 1947, India inherited a shattered economy. The economy was completely damaged. This damage was largely done by the exploitative policies adopted by the

India followed Import Substitution Industrialization policy up to 1991. The major highlights of this policy included significant restrictions on imports (ensured by high tariffs and import control), limited incentives to private sector, a large public sector (with focus on heavy industries) and an overvalued exchange rate. Furthermore, there were restrictions on consumer goods too. Quantitative restrictions such as import licensing and exchange control existed too. All of these policy measures were part and parcel of what is known as “barriers to an economy.” The quantitative restrictions prevented the opening up of the Indian economy. Thus, integration of India with the ‘global village’ was to wait till 1991.

To deal with the challenges faced by FDI in India it is necessary that India must also focus on poverty reduction, trade liberalization, and banking and insurance liberalization.

multinationals (EMNCs), through outward foreign direct investment (OFDI). This internationalisation phenomenon, has led to increase interest from researchers in the international business discipline (Cavusgil, 1980; Hoskisson, Eden, Lau, & Wright, 2000; Jormanainen & Koveshnikov, 2012). In 2013, emerging economies invested $553 billion, representing 39% of global OFDI, compared with only 12% at the beginning of the 2000 (UNCTAD, 2014). These trends are consistent across different emerging market sub-regions, as organisations that are aggressively investing are doing so not only from large emerging economies like China, India, Brazil, and Russia but also from a number of new emerging economies in Asia, Latin America and Africa (Gammeltoft, Pradhan, & Goldstein, 2010; Goldstein & Bonaglia, 2007). Emerging markets (EM) are seen generally as low income, rapid growth countries using economic liberalisation as their primary engine of growth (Hoskisson et al., 2000). The economic liberalisation or open policies adopted by these emerging markets during the last two decades has led organisations from these economies to internationalize or seek markets abroad. Emerging markets are known to be heterogeneous in their level of development and environmental surroundings (Bianchi, 2014). Each manifests different starting points or different stages of

Economic liberalization in the world has led to the expansion of many business organizations on a global scale. This global economy has in turn increased the number of cross-cultural interactions among various multinational companies. Globalization refers to a process which deals in developing relatively standardized products with global appeals, as well as rationalizing operations throughout the world (Barto and Martin, 1998). To achieve these objectives, organizations require sending their selected representatives for overseas assignments to keep a check on the standards of their products and services abroad. Human resource experts all over the world agree that it is essential for any Multinational Company (MNC) to select, train, develop and retain employees who can work and live efficiently beyond their national boundary (Caligiuri, 2000).

Liberalisation and globalisation has changed the business scenario all over the world. The multilateral trade agenda and the WTO have made easy and free exchange of technology and know – how. A restructuring wave has swept the corporate sector the world, taking within its fold big as well as small industries. Not only the new industries like e-commerce and biotechnology are transforming, old industries are also being transformed. With the increasing competition, heading toward globalisation, the corporate restructuring activities are expected to occur at a larger scale. It plays a major role in enabling companies to achieve economies of scale, competitiveness etc.

The liberalization theory suggests in order to generate employment and achieve greater social equity in countries like India where labor is abundant and relatively cheap, significant openness to the global market is essential. The 1991 economic reforms marked ‘a clear break from the country’s socialist strategy of state-directed, heavy-industry based, and import substitution industrialization’ (Chamarbagwala 2006:1997).

The Reserve Bank of India (RBI) is India’s central bank. Though public sector bank’s currently dominate the banking industry, numerous private and foreign banks exist. India 's government-owned banks dominate the market. Their performance has been mixed, with a few being consistent profitable. Several public sector banks are being restructured, and in some the government either already has or will reduce its ownership.

The system of banking in India is very extensive. The value of Indian banking sector is US$270 billion. And the deposit of the Indian banking sector is US$220 billion. Now the Indian banking sector has changed. Nowadays using of things like internet banking and core banking have made the daily operations of bank more easy to use. Mumbai is also known as the trade and commerce capital of India. These are the few basic things which are related to the Indian economy like Indian rupee is equal to 100 pause, the fiscal year is from 1 April-31 March, the trade organisations are WTO,SAFTA,BRICS,G2O and others. The current GDP growth is 5.8%.If we see the GDP in sectorial wise then in agriculture the GDP is 13.7%, in the industry sector the GDP is 21.5% and in the service sector it is64.8%The unemployment percentage in the urban areas is 3% and in the rural areas it is 2%.and in the numbers I id 10.8 million. The main industries in India are agriculture, petroleum products, chemicals, pharmaceuticals, software,

With a booming economy throughout the 2000s, India was touted as one of the most promising major emerging markets. But that breakneck growth sputtered to a decade low in 2012, with many observers pointing to the

Patibandla (2006) examined the ownership structure and firm performance on Indian firms by separating large investors into private foreignin stitutional investors and government-owned local financial institutions. Patibandla found a positive relationship between private foreign institutional investors and firm profitability and a negative relationship between government-owned local financial institutions and firm profitability.