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.
What was one major shift caused by the economic reforms of 1991?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Opening Indian markets to international competition.
Option (1) Greater state ownership of farms. — Incorrect. Liberalisation is a break with the earlier policy of greater state control over the economy. More state ownership of farms would mean more control, the opposite of what the 1991 reforms did.
Option (2) Increased control of the government over private trade. — Incorrect. Greater government control over the economy, with laws protecting Indian business, was the earlier policy. The reforms removed rules that regulated trade, so government control over private trade decreased.
Option (3) Restrictions on foreign investment. — Incorrect. Foreign investment was one of the sectors in which the reforms removed restrictions, so that the economy could join the world market. Putting new restrictions on it would undo the reform.
Option (4) Opening Indian markets to international competition. — Correct. The policy decisions taken since 1991 opened up the Indian economy to the world market. This marked a break with the earlier policy of protecting Indian business from competition of the wider world.
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.…” |