Question

Explain the advantages and disadvantages of liberalization.

Answer 1

Liberalization means the relaxation of various government restrictions in the areas of social and economic policies of the country.
Advantages of Liberalisation:

• Increase in foreign investment: If a country liberalizes its trade, it will make the country – more attractive for inward investment.
• Increase the foreign exchange reserve: Relaxation in the regulations covering foreign investment and foreign exchange has paved way for easy access to foreign capital.
• Increase in consumption: Liberalization increases the number of goods available for consumption within a country

Disadvantages of Liberalisation:

• Increase in unemployment: Due to liberalization some industries grow, some decline. Therefore, there may be unemployment from certain industries closing.
• Increased dependence on foreign nations: Trade liberalization means firms will face greater competition from abroad.
• Unbalanced development: Trade liberalization may be damaging for developing economies. which cannot compete against free trade.