Before 1990, in India, to start any business one needed to take a license from the government. However, after 1991, there is an ease in the starting of new business and foreign investment. What would you call this process?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Liberalisation
Option (1) Liberalisation — Correct. Liberalisation means loosening government regulations on capital, labour and trade and allowing easier access for foreign companies to set up industries in India. Since the 1990s the government has followed this policy: private companies, especially foreign firms, are encouraged to invest in sectors earlier reserved for the government, and licences are no longer required to open industries, which is the change described in the question.
Option (2) Privatisation — Incorrect. Privatisation is selling government-owned companies to private companies. It is one of the policies inside liberalisation, but the question describes something wider: ending licences and opening the economy to new business and foreign investment.
Option (3) Globalisation — Incorrect. Globalisation is the growing link of the Indian economy with the world economy. The globalisation of the Indian economy has been due primarily to the policy of liberalisation; the policy change in the question is liberalisation itself, and globalisation is its wider result.
Option (4) License Raj — Incorrect. ‘License Raj’ is the popular name for the old system of licences and controls, under which a business needed government permission to start or expand. It describes the situation before 1991, which the change in the question brought to an end.
Note: The term in Option (4), ‘License Raj’, is not in NCERT (2025-26); it is explained here for the benefit of the students.
NCERT (2025-26): “Debate on Liberalisation – Market Versus State … The globalisation of the Indian economy has been due primarily to the policy of liberalisation that was started in the late 1980s. Liberalisation includes a range of policies such as the privatisation of public sector enterprises (selling government-owned companies to private companies); loosening of government regulations on capital, labour, and trade; a reduction in tariffs and import duties so that foreign goods can be imported more easily; and allowing easier access for foreign companies to set up industries in India.…” “Social Change and Development in India — Chapter 5, 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.…” |