Q1. Which of the following Industrial Policy Resolutions first introduced the concept of a mixed economy in India, delineating the roles of the public and private sectors?
Industrial Growth, Policy Reforms and LPG: RAS Prelims MCQs
91 RAS Prelims MCQs on industrial growth, policy reforms and the LPG reforms of 1991 cover the Industrial Policy Resolutions, the licensing system, the 1991 balance of payments crisis, privatisation and disinvestment. The MSME definition and Make in India are asked as facts and statements, and the explanations tie each policy to its year.
Practice questions based on the RPSC RAS Prelims syllabus. They follow the exam pattern but are not past-paper questions.
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Q2. Under the Industrial Policy Resolution of 1956, industries were classified into three categories. Which schedule exclusively contained industries whose future development would be the exclusive responsibility of the State?
Explanation
The Industrial Policy Resolution of 1956 categorized industries into three schedules to delineate state and private roles. Schedule A consisted of seventeen industries whose future development was made the exclusive responsibility of the State. These included core sectors like arms and ammunition, atomic energy, iron and steel, and heavy machinery, ensuring strategic government control over essential national industrial resources.
Q3. What was the primary focus of the Industrial Policy Statement of 1977 introduced by the Janata government?
Explanation
The Industrial Policy Statement of 1977, introduced by the Janata government, shifted the emphasis from heavy industries toward decentralization. Its primary focus was the promotion of cottage and small-scale industries to generate large-scale employment and rural development. This policy introduced the concept of District Industries Centres to provide all necessary support services to small entrepreneurs under one single roof.
Q4. Which of the following statements incorrectly describes a feature of the Industrial Policy Resolution of 1956?
Explanation
The Industrial Policy Resolution of 1956 served as the economic constitution of India, heavily influenced by the Mahalanobis model. While it emphasized the public sector’s commanding height and balanced regional development, it did not advocate for the wholesale nationalization of all existing private industrial units. Instead, it provided a framework for public and private sectors to coexist harmoniously.
Q5. Read the following statements regarding the Industrial Policy of 1980:
I. It sought to promote the concept of economic federalism.
II. It introduced the concept of nucleus plants in industrially backward districts.
III. It completely abolished the MRTP Act limit for large business houses.
Which of the combinations given above is correct?
I. It sought to promote the concept of economic federalism.
II. It introduced the concept of nucleus plants in industrially backward districts.
III. It completely abolished the MRTP Act limit for large business houses.
Which of the combinations given above is correct?
Explanation
The Industrial Policy Statement of 1980 aimed to revive the industrial sector by promoting economic federalism. It introduced the concept of nucleus plants in industrially backward districts to generate ancillarization and create employment opportunities. While it relaxed certain constraints, it did not completely abolish the MRTP Act limits for large business houses, which remained a feature of the regulatory framework.
Q6. The system of industrial licensing in India, often referred to as the Licence Raj, was primarily governed by the provisions of which legislation?
Explanation
The system of industrial licensing in India was established and governed by the Industries Development and Regulation Act of 1951. This legislation empowered the government to regulate industrial growth, capacity expansion, and the manufacture of new products. It became the legal basis for the Licence Raj, requiring entrepreneurs to obtain government permission for various stages of industrial operation.
Q7. Which committee was appointed in 1967 to inquire into the working of the industrial licensing system and concluded that the system had failed to prevent the concentration of economic power?
Explanation
The Industrial Licensing Policy Inquiry Committee, popularly known as the Dutt Committee, was appointed in 1967 to evaluate the licensing system. It found that the system had failed to prevent the concentration of economic power and often benefited large industrial houses. Its recommendations led to more stringent regulations under the Monopolies and Restrictive Trade Practices Act to curb dominance.
Q8. Given below are two statements, one is labelled as Assertion (A) and the other is labelled as
Reason (R).
Assertion (A): The Licence Raj system in India led to widespread corruption and rent-seeking behavior by industrialists.
Reason (R): Entrepreneurs spent more time and resources managing government bureaucrats to secure licenses rather than improving product quality and market competitiveness.
Which of the following is correct?
Reason (R).
Assertion (A): The Licence Raj system in India led to widespread corruption and rent-seeking behavior by industrialists.
Reason (R): Entrepreneurs spent more time and resources managing government bureaucrats to secure licenses rather than improving product quality and market competitiveness.
Which of the following is correct?
Explanation
The Licence Raj created an environment where government permits were scarce and valuable resources. This led to rent-seeking behavior, where industrialists focused on lobbying bureaucrats rather than improving efficiency. Consequently, substantial time and capital were diverted from innovation and quality improvement toward navigating complex administrative hurdles. This structural inefficiency was a primary driver of widespread corruption and stagnant competitiveness.
Q9. In the context of the pre-1991 industrial regime, what was the primary objective of the MRTP Act, 1969?
Explanation
The Monopolies and Restrictive Trade Practices Act of 1969 was enacted to ensure that the operation of the economic system did not result in the concentration of wealth. It aimed to prohibit monopolistic and restrictive trade practices that were prejudicial to public interest. Large companies with assets above a certain threshold required special approval for expansion to prevent market dominance.
Q10. Match List I with List II and select the correct answer.
| Legislation/Policy | Key Feature/Objective |
|---|---|
| A. IPR 1956 | i. Framework for industrial licensing |
| B. MRTP Act 1969 | ii. Strict regulation of foreign exchange |
| C. FERA 1973 | iii. Check on dominant trade practices |
| D. IDRA 1951 | iv. Classification of industries into three schedules |
Explanation
The industrial regulatory framework in India comprised several key pillars. The Industrial Policy Resolution of 1956 classified industries into three schedules to define state roles. The MRTP Act focused on checking dominant trade practices, while the Industries Development and Regulation Act provided the mechanism for industrial licensing. Lastly, the Foreign Exchange Regulation Act of 1973 imposed strict controls.Answer key for these questions
| Q | Correct answer |
|---|---|
| 1 | (b) Industrial Policy Resolution, 1948 |
| 2 | (a) Schedule A |
| 3 | (c) Promotion of small-scale, cottage, and village industries |
| 4 | (d) Nationalization of all existing private sector industrial units. |
| 5 | (c) I and II only |
| 6 | (b) Industries (Development and Regulation) Act, 1951 |
| 7 | (d) Dutt Committee |
| 8 | (a) Both A and R are true and R is the correct explanation of A. |
| 9 | (c) To prevent the concentration of economic power to the common detriment |
| 10 | (a) A-iv, B-iii, C-ii, D-i |
Key facts from Industrial Growth, Policy Reforms and LPG
- The Industrial Policy Resolution of 1948 first introduced the mixed economy; the 1956 resolution divided industries into three schedules, with Schedule A reserved for the State.
- The Industries (Development and Regulation) Act, 1951 governed industrial licensing, known as the Licence Raj; the Dutt Committee of 1967 inquired into it.
- The IMF and the World Bank gave India structural adjustment loans in 1991.
- Compulsory licensing today remains for some industries, such as electronic aerospace and defence equipment.
- Transferring ownership and control of a public sector enterprise to the private sector is privatisation; DIPAM manages government investment and public asset management.
- The MSME definition of 2020 uses investment in plant and machinery and annual turnover; Make in India was launched in 2014.
Frequently asked questions
How many RAS Prelims practice MCQs are there on Industrial Growth, Policy Reforms and LPG?
This page has 91 practice MCQs on Industrial Growth, Policy Reforms and LPG (Indian Economy). Each has the correct answer, and most have an explanation.
What did the Industrial Policy Resolution of 1956 do?
It classified industries into three categories: Schedule A for the exclusive responsibility of the State, Schedule B for the State and private sector together, and Schedule C for the private sector. It is called the Economic Constitution of India.
What is privatisation?
The transfer of ownership, management and control of a public sector enterprise to the private sector. It differs from partial disinvestment, where the Government sells only a part of its shares and keeps control.
Which Act governed industrial licensing in India?
The Industries (Development and Regulation) Act, 1951. It required industrial units to get a licence from the Government, and the system came to be known as the Licence Raj until it was dismantled in 1991.