In the year 1991, India faced a crisis in terms of foreign debts. The government was not in a position to pay its foreign debt. The foreign exchange reserves, normally maintained for the import of essential commodities like petroleum etc., were not enough to pay the required imports for fifteen days. This crisis was further intensified by the rise in prices of essential commodities. India approached the World Bank and the International Monetary Fund (IMF) and received a loan of $7 billion to face the crisis. These international organizations put certain conditions before India to get the loan. Like the government will liberalize, remove restrictions on the private sector and government intervention in many areas. It was also expected that restrictions on foreign trade between India and other countries would be removed. India accepted the conditions of the World Bank and IMF and announced the New Economic Policy (NEP).
The New Economic Policy (NEP) consisted of wide-ranging economic reforms which fall under the three heads of:
A. Globalisation
B. Rural development
C. Privatisation
D. Liberalisation
E. Outsourcing
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → A, C and D only
The reforms of the New Economic Policy (NEP) of 1991 fall under three heads, often called LPG: liberalisation, privatisation and globalisation.
A. Globalisation — Included. It links the Indian economy with the world economy.
B. Rural development — Not included. It is a separate area of policy, not one of the three heads.
C. Privatisation — Included. It hands over the ownership or management of government companies to the private sector.
D. Liberalisation — Included. It removes the rules and controls that held back economic activity, such as industrial licensing.
E. Outsourcing — Not included. It is an outcome of globalisation. A company hires regular services, such as legal advice or computer services, from outside, mostly from other countries.
NCERT (2026-27): “…India agreed to the conditionalities of World Bank and IMF and announced the New Economic Policy (NEP). The NEP consisted of wide ranging economic reforms. The thrust of the policies was towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. This set of policies can broadly be classified into two groups: the stabilisation measures and the structural reform measures. … The government initiated a variety of policies which fall under three heads viz., liberalisation, privatisation and globalisation.… 3.5 Globalisation … Outsourcing: This is one of the important outcomes of the globalisation process. In outsourcing, a company hires regular service from external sources, mostly from other countries, which was previously provided internally or from within the country (like legal advice, computer service, advertisement, security — each provided by respective departments of the company).…” |