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Unit 21 Liberalisation Structural Adjustment 5 MSO3English Medium IGNOU Sociology by Dr Sushma Singh - YouTube
Channel: Dr. Sushma Singh
[0]
hello welcome dr sushma singh this聽
side today in unit 21 liberalization聽聽
[8]
and structural adjustment program we are going聽
to start our lecture with topic external sectors
[20]
liberalization on the external account implies聽
making the flow of goods in and out of the country聽聽
[27]
easy this can involve a reduction in procedures聽
as well as tariffs or removal of quotas聽聽
[37]
quotas only import of various communities had聽
earlier been introduced because the government聽聽
[43]
wanted to offer domestic energy an industry as聽
assured market in which to establish itself the聽聽
[55]
removal of quotas mean the goods could be imported聽
in any amount on payment of appropriate tariffs聽聽
[64]
in the reform period there had been a substantial聽
increase in export but the trade balance continued聽聽
[71]
to be negative as import grew faster than聽
export however the positive side of this is that聽聽
[80]
an increase in net inflow of invisible has聽
moved the current account balance to be聽聽
[86]
positive from 2001 to 2002. in recent years聽
the current account and capital account are聽聽
[95]
both positive which implies that the foreign聽
exchange reserves have been rising repetitively
[106]
it is shown that in the net inflow聽
on the capital account of the last聽聽
[110]
few years there has been substantial inflow聽
funds from the foreign institutional investors聽聽
[117]
into the stock market which has increased the聽
foreign exchange reserves to unsustainable levels聽聽
[125]
there have been suggestions from some聽
economist that the rising foreign exchange聽聽
[131]
in the rbi's coffers should be used聽
for financing import for infrastructure聽聽
[139]
this is fraught with the danger since it聽
amounts to borrowing to an international market聽聽
[147]
the increase in reserves is due to the short-run聽
stock market inflows which could exit with ease at聽聽
[155]
little naughty notice and the rbi would have聽
to come up with the necessary hard currency聽聽
[163]
if india chooses to invest these reserves聽
in in infrastructure it would have two flaws聽聽
[172]
it would be borrowing short to invest long聽
which runs the risk of a liquidity crisis聽聽
[180]
and infrastructure is not a foreign聽
exchange earning area therefore these聽聽
[187]
projects even in the future would not generate聽
the necessary foreign exchange for repayment
[196]
let us discuss the external sector聽
reforms in a little more detail聽聽
[201]
the liberalization of the聽
external account involved聽聽
[205]
not only an easier flow of goods but also a large聽
devolution of the currency and a simultaneous move聽聽
[214]
from a system of fixed exchange rates to a聽
managed float devaluation theoretically is聽聽
[222]
good news for exporters because their goods become聽
relatively cheaper in the international market and聽聽
[230]
imports become more expensive resulting in a聽
decline in the demand for imports in the country聽聽
[238]
the trade balance should therefore improve however聽
if the domestic industry is undergoing inflation聽聽
[245]
and imports are liberalized then it could have the聽
opposite effect especially if exports are elastic聽聽
[254]
and imports are not a community is said to have聽
elastic demand if a small price fall brings聽聽
[262]
about a proportionally larger change in the聽
quantity demanded if so if exports are elastic聽聽
[272]
and import or not then the import bill will rise聽
further after devaluation since we will import the聽聽
[281]
same volume of goods in an inflatory situation聽
even after devaluation if exports are elastic聽聽
[291]
we will not see an equivalent rise in the volume聽
of the export therefore the trade balance could聽聽
[298]
worsen even when de-evaluation occur in the聽
process of external sector liberalization
[307]
there have been more serious fears about the聽
domestic consequences of the import liberalization聽聽
[315]
it could lead to de-industrialization聽聽
[319]
much of the discussion on the聽
industrialization here borrows from patnayak
[328]
the industrialization here聽
is defined as a situation聽聽
[331]
where there is a decline in the workforce聽
of the industrial sector due to decline in聽聽
[338]
aggregated demand which pushes people out of the聽
workforce this could happen on three accounts聽聽
[349]
the first the most straightforward one is the聽
where import exceed export and the current聽聽
[357]
account balance is negative this implies that聽
there is a decline in demand for domestic goods聽聽
[364]
which reduces employment in the second聽
instance d industrialization could occur聽聽
[371]
even in the presence of a trade balance of聽
export surplus where the agricultural surplus聽聽
[379]
instead of augmented production or demand in the聽
domestic economy is used to consume imported goods
[389]
this is the classic colonial drain situation聽
where the colonial rulers would siphon off聽聽
[397]
a part of the surplus to the metropolis聽
without either generating adequate demand聽聽
[405]
for non-agricultural goods or argumented聽
the productivity of the land this killed聽聽
[414]
the market for domestic non-agricultural聽
goods which led to de-industrialization聽聽
[421]
in the third instance where which is聽
representative of modern day globalized economy聽聽
[428]
assume that we have an open capital account with a聽
flexible exchange rate if for some reason there is聽聽
[437]
an increase in capital inflow then the rupee聽
will become more valuable vice versa foreign聽聽
[444]
currency this would make the imported communities聽
less expensive as compared to the domestic good聽聽
[453]
even in the home market consumers will聽
switch from domestic goods to imported聽聽
[460]
goods thereby reducing domestic production and聽
employment in such circumstances the state could聽聽
[470]
autonomously act by increasing expenditure聽
to counter act de-industrialization
[479]
but even that may be curtailed by聽
multilateral agency pressures who聽聽
[485]
believe in prudent finance policies to balance聽
budget even at the cost of rising unemployment聽聽
[494]
in the economy the exercise of trying to curb聽
fiscal deficit in india therefore must be seen聽聽
[501]
with care since it is now well accepted that聽
decade of the 1990s was a period of jobless growth
[512]
there are two diff possible ways聽
of reducing the fiscal deficit聽聽
[516]
pruning expenditures or increasing tax and聽
non-tax receipts it is political easier to聽聽
[524]
cut expenditures where there are聽
no lobbying groups opposing this
[532]
unlike increase in taxes聽
which is politically desirable聽聽
[538]
for example social sector and capital expenditure聽
reductions attract the least direct opposition聽聽
[545]
as the immediate effect of the decline is not聽
felt by the current generation it is therefore聽聽
[552]
no surprise that there are the two areas which聽
have seen substantial reduction in expenditures聽聽
[561]
as a proportion of the total national income聽
public expenditure as a proportion of gdp has聽聽
[569]
declined from about 30 percent at the beginning聽
of the reform period to 27 at the end of the 90s聽聽
[578]
the share of capital expenditures as well聽
as the share of development expenditures聽聽
[583]
has also declined subsistencely聽
over the decade of the 1990s
[591]
capital expenditures impact on long-term growth聽聽
[594]
since these are in the nature聽
of infrastructure investments聽聽
[601]
social sector expenditure enhance human security聽
by ensuring access to the citizen to affordable聽聽
[609]
health care and education reduced expenditures in聽
both these areas therefore have long term impacts聽聽
[617]
on accumulation of physical assets as well聽
as the growth of human capital in the economy
[629]
let us now turn our attention聽
briefly to the social sector聽聽
[633]
the social sector include education health聽
and rural development one of the core argument聽聽
[642]
of new liberal ideology is that intervention聽
by the state should be restricted to social聽聽
[648]
development and defense which are its fundamental聽
duties and economic activity should be left with聽聽
[656]
the private sector going by this logic we should聽
expect that irrespective of allocation changes in聽聽
[665]
other sectors in the social sector there should聽
have been an increase however in 1990s there was聽聽
[674]
lower social sector spending by the center as聽
well as the states combined as a proportion of聽聽
[681]
gdp even though there seems to be an increase聽
in per capita expenditures in the social sector
[690]
what this implies is that the increase in social聽
sector spending has not matched the increase in聽聽
[696]
gdp in the reform period here we want to close聽
this lecture thanks for patience full hearing
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