DMPQ-What do you understand by the term Liberalisation? What are the components of Liberalisation?

The term “liberalization” in this context implies economic liberalization. The essence of thispolicy is that greater freedom is to be given to the entrepreneur of any industry, trade orbusiness and that governmental control on the same be reduced to the minimum. Rules and laws which were aimed at regulating the economic activities became majorhindrances in growth and development. Hence, Liberalisation was introduced to put an end tothese restrictions and open up various sectors of the economy.

Major components of Liberalisation are:

  • Removal of Industrial Licensing and Registration
  • Reducing the quantitative restrictions on imports also reducing import duties.
  • Reduced control on foreign exchange management both in current and capital accounts.
  • Reforms in financial systems.
  • Reduction in the level of both personal and corporate taxation.
  • Liberalized rules for foreign direct investment (FDI) and foreign portfolio investment
  • (FPI).
  • Opening of the public-sector domains like power, transport, banking etc to private
  • Partial privatization of public sector units.
  • Change in approach towards industrial sickness.


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