Read the passage carefully and answer the following questions from
The Economic Policy of Liberalisation
Globalisation involves a stretching of social and economic relationships throughout the world. This stretching is pushed by certain economic policies. Very broadly, this process in India is termed as liberalisation. The term liberalisation refers to a range of policy decisions that the Indian state took since 1991 to open up the Indian economy to the world market. This marked a break with an earlier stated policy of the government to have a greater control over the economy. The state after independence had put in place a large number of laws that ensured that the Indian market and Indian indigenous business were protected from competition of the wider world. The underlying assumption of such a policy was that an erstwhile colonial country would be at a disadvantage in a free market situation.
Liberalisation of the economy meant the steady removal of the rules that regulated Indian trade and finance regulations. These measures are also described as economic reforms. What are these reforms? Since July 1991, the Indian economy has witnessed a series of reforms in all major sectors of the economy (agriculture, industry, trade, foreign investment and technology, public sector, financial institutions, etc). The basic assumption was that greater integration into the global market would be beneficial to the Indian economy.
Liberalisation measures, are also called economic reforms because
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → They restructured all major sectors of the economy.
Option (1) They were only related to taxation. — Incorrect. Since July 1991 reforms have come in all major sectors — agriculture, industry, trade, foreign investment and technology, the public sector and financial institutions. Taxation is only one part of this, so ‘only taxation’ is wrong.
Option (2) They restructured all major sectors of the economy. — Correct. The liberalisation measures are called economic reforms because, since July 1991, the economy has seen a series of reforms in all major sectors, from agriculture and industry to trade, technology and finance.
Option (3) They changed only the public sector. — Incorrect. The public sector is one of the many sectors reformed; agriculture, industry, trade and finance were reformed too, so ‘only the public sector’ is wrong.
Option (4) They benefited only multinational companies. — Incorrect. The reforms were made on the assumption that greater integration into the global market would benefit the Indian economy as a whole; the word ‘only’ makes this statement false, and it does not explain why they are called reforms.
NCERT (2025-26): “a. The Economic Policy of Liberalisation Globalisation involves a stretching of social and economic relationships throughout the world. This stretching is pushed by certain economic policies. Very broadly this process in India is termed as liberalisation. The term liberalisation refers to a range of policy decisions that the Indian state took since 1991 to open up the Indian economy to the world market. This marked a break with an earlier stated policy of the government to have a greater control over the economy. The state after independence had put in place a large number of laws that ensured that the Indian market and Indian indigenous business were protected from competition of the wider world. The underlying assumption of such a policy was that an erstwhile colonial country would be at disadvantage in a free market situation.… …Liberalisation of the economy meant the steady removal of the rules that regulated Indian trade and finance regulations. These measures are also described as economic reforms. What are these reforms? Since July 1991, the Indian economy has witnessed a series of reforms in all major sectors of the economy (agriculture, industry, trade, foreign investment and technology, public sector, financial institutions, etc). The basic assumption was that greater integration into the global market would be beneficial to Indian economy.…” |