Privatisation and globalisation

Privatisation means shedding the government's ownership or management of its enterprises. This can be done by selling them outright, or by selling part of their shares to the public, which is called disinvestment. The idea: people work harder and more carefully for something that is their own, and private owners must compete to survive.

At the same time, the most successful public sector enterprises were given more freedom to run themselves, as maharatnas (such as Indian Oil Corporation and SAIL), navratnas (such as Hindustan Aeronautics Ltd, MTNL and IRCTC) and miniratnas (such as BSNL and the Airports Authority of India).

Globalisation means integrating the economy with the world economy: more trade, investment, technology and people moving across borders. One result is outsourcing: a company buys services from outside firms, often in other countries. India became a major destination for outsourced services such as BPO (business process outsourcing, like call centres), accounting, banking services and even teaching.

The World Trade Organisation (WTO) was set up in 1995 to replace the GATT (General Agreement on Tariffs and Trade), which began in 1948 with 23 countries. The WTO aims at a rule-based trading system, in which countries cut tariff and non-tariff barriers. It also covers trade in services.

Indian companies, too, went global: ONGC Videsh (oil), Tata Steel, HCL (IT) and Dr Reddy's Laboratories (medicines) all work in many countries.