Liberalization:

• The policy of increasing the freedom given to the private enterprises by allowing the market forces to play their role and reduce interference of the state is called the policy of liberalization.
• In other words, liberalization refers to relaxing the policy and the restrictions imposed on economic activities.

Liberalization in terms of India:
In the’context of Indian economy, liberalization refers to ‘Increasing the role of private sector and market oriented processes in economic planning in place of state regulated economic processes in India’s mixed economic system’.

Following things take place during the process of liberalization:

• The state gradually reduces the controls imposed by it on the economic activities.
• The role of market forces of demand and supply increases in decision making of economic activities
• The government systematically allows the private sector to invest in those areas which were previously reserved for the public sector.
• The government slowly and systematically reduces the protection granted by the state to domestic industries against foreign competition. This means that the government stops giving additional favour to the domestic industries and hence reduces the discrimination between domestic and foreign enterprises.
• This way a healthy market situation is generated even for the foreign companies and they start investing in the Indian markets.