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.
If India had continued its pre-1991 protectionist policies, which scenario would most likely occur?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Domestic industries shielded from international competition.
Option (1) Faster inflow of foreign investment. — Incorrect. Before 1991, laws protected Indian business from the wider world and the economy was not open to the world market. If those policies had continued, foreign companies would still face restrictions, so foreign investment would not flow in faster.
Option (2) Easy competition with global companies. — Incorrect. Protected industries are kept away from competition with global companies, so they get no practice in facing it. Continuing protection would not make such competition easy; it would avoid it altogether.
Option (3) Increased openness to the global market. — Incorrect. Openness to the global market is the result of liberalisation, which ended the protectionist policies. Continuing protection would keep the market closed, not more open.
Option (4) Domestic industries shielded from international competition. — Correct. Before 1991 the state had put in place a large number of laws that protected the Indian market and Indian business from competition of the wider world, on the assumption that a former colony would be at a disadvantage in a free market. Continuing those policies would have kept this shield.
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.…” |