_ _ _ _ _ _ was provided by the Government to expand production only if the government was convinced that the economy required a larger quantity of goods.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → License
Under the industrial policy before 1991, even an existing industry needed a licence to expand output. The government gave it only when it was convinced that the economy needed more of the good. This kept output from going beyond what the economy required.
Tariffs and quotas were tools of trade policy that restricted imports, and a subsidy is help paid by the government. None of them gave permission to produce more.
NCERT (2026-27): “Industrial Policy Resolution 1956 … Although there was a category of industries left to the private sector, the sector was kept under state control through a system of licenses. No new industry was allowed unless a license was obtained from the government. This policy was used for promoting industry in backward regions; it was easier to obtain a license if the industrial unit was established in an economically backward area. In addition, such units were given certain concessions such as tax benefits and electricity at a lower tariff. The purpose of this policy was to promote regional equality. Even an existing industry had to obtain a license for expanding output or for diversifying production (producing a new variety of goods). This was meant to ensure that the quantity of goods produced was not more than what the economy required. License to expand production was given only if the government was convinced that the economy required a larger quantity of goods.… 2.5 Trade Policy: Import Substitution … Protection from imports took two forms: tariffs and quotas. Tariffs are a tax on imported goods; they make imported goods more expensive and discourage their use. Quotas specify the quantity of goods which can be imported.…” |