What are the Advantages and Disadvantages of Liberalisation?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

The Advantages and Disadvantages of Liberalisation are an increase in foreign direct investment in the country and economic instability respectively. The term ‘liberalization’ refers to the removal of restrictions on certain private individual activities. Liberalization is used in the context of relaxing the restrictions already imposed on the social and economic policies of the government. Liberalization has both positive and negative effects on our country.

Key Advantages and Disadvantages of Liberalisation

Liberalisation broadly refers to the situation where government controls are no longer as strict as before. The advantages and disadvantages of Liberalisation are as follows.

Advantages of Liberalisation

  • Liberalization increases foreign direct investment in the country
  • It reduces the monopoly of the public sector
  • It also promotes the economic development of the nation
  • Liberalization increases employment opportunities
  • It also reduces interest rates and charges
  • Technology is developed by the use of foreign technology in industrial applications.

Disadvantages of Liberalisation

  • Trade liberalization means that firms will face heavy competition from abroad. It can increase dependence on foreign nations for technology, foreign exchange, etc.
  • This can result in economic instability as any change in currency in the foreign market will have a major impact on the economy.
  • The domestic sector will be dependent on cheap raw materials from abroad.
  • This can result in an increase in acquisitions and mergers. This will make employees of smaller companies less skilled. This can lead to stagnation of productivity.

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