Read the passage carefully and answer the following questions
Economy and change in India
Since the 1990s, private companies, especially foreign firms, have been encouraged to invest in sectors previously reserved for the government, including telecom, civil aviation, power, etc. Licenses have been no longer required to open industries. Foreign products have been now easily available in Indian shops. As a result, small and large, have been bought over by multinationals. Simultaneously, some Indian companies have been becoming multinational companies. More and more companies have been reducing the number of permanent employees and outsourcing their work to smaller companies or even to homes. For multinational companies, this outsourcing is done across the globe. The government is also trying to sell its share in several public sector companies, a process known as disinvestment. Many government workers have been scared that after disinvestment, they will lose their jobs. In ‘Modern Foods’, which was set up by the government to make healthy bread available at cheap prices, and which was the first company to be privatised, 60% of the workers were forced to retire in the first five years. In India, in 2018–19, nearly 43% were employed in the primary sector (agriculture and mining), 17% in the secondary sector (manufacturing, construction, and utilities), and 32% in the tertiary sector (trade, transport, financial services, etc.). India is still largely an agricultural country. The service sector – shops, banks, the IT industry, hotels, and other services have been employing more people, and the urban middle class is growing.
What policy encouraged private companies to invest in sectors previously reserved for government?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Liberalization
Option (1) Globalization — Incorrect. Globalisation is the stretching of social and economic relationships across the world. It is the wider process; the policy that opened sectors to private investment is liberalisation, which pushed India into globalisation.
Option (2) Industrialization — Incorrect. Industrialisation is the rise of machine production in factories. It is a process of change, not a government policy about who may invest in which sector.
Option (3) Modernization — Incorrect. Modernisation refers to improvement in technology and production and to new values; it does not decide which sectors are reserved for the government.
Option (4) Liberalization — Correct. Since the 1990s the government has followed a policy of liberalisation: private companies, especially foreign firms, are encouraged to invest in sectors earlier reserved for the government, such as telecom, civil aviation and power, and licences are no longer needed to open industries.
NCERT (2025-26): “Globalisation, Liberalisation and Changes in Indian Industry Since the 1990s, the government has followed a policy of liberalisation. Private companies, especially foreign firms, are encouraged to invest in sectors earlier reserved for the government, including telecom, civil aviation, power, etc. Licenses are no longer required to open industries. Foreign products are now easily available in Indian shops. As a result of liberalisation, many Indian companies— small and large, have been bought over by multinationals. At the same time some Indian companies are becoming multinational companies.…” |