Which of the following was NOT one of the ways in which regulatory me…

Which of the following was NOT one of the ways in which regulatory mechanisms over industry were enforced in India before 1991?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Prices being freely determined by the market in most industries

Before 1991, the government kept industry under tight control in four ways. Free market prices came only with the reforms.

Option (1) Industrial licensing, under which an entrepreneur needed government permission to start or close a firm — True. Every entrepreneur needed government permission to start or close a firm.

Option (2) Private sector not being allowed in many industries — True. Many industries were closed to private firms.

Option (3) Some goods being produced only in small-scale industries — True. Some goods were reserved for small-scale industries.

Option (4) Prices being freely determined by the market in most industries — False. Before 1991 the government controlled the prices of selected industrial products. Letting the market fix prices came after the 1991 reforms.

NCERT (2026-27): “Deregulation of Industrial Sector: In India, regulatory mechanisms were enforced in various ways (i) industrial licensing under which every entrepreneur had to get permission from government officials to start a firm, close a firm or decide the amount of goods that could be produced (ii) private sector was not allowed in many industries (iii) some goods could be produced only in small-scale industries, and (iv) controls on price fixation and distribution of selected industrial products. The reform policies introduced in and after 1991 removed many of these restrictions. Industrial licensing was abolished for almost all but product categories — alcohol, cigarettes, hazardous chemicals, industrial explosives, electronics, aerospace and drugs and pharmaceuticals. The only industries which are now reserved for the public sector are a part of atomic energy generation and some core activities in railway transport. Many goods produced by small-scale industries have now been dereserved. In most industries, the market has been allowed to determine the prices.”