Q11. Which of the following was NOT a macroeconomic crisis indicator that forced India to adopt the New Economic Policy in 1991?
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.
Showing 11–20 of 91 questions
Q12. Consider the following statements regarding the features of the Licence Raj in India:
I. It required government approval to set up new industrial units.
II. It regulated the expansion of capacity of existing industries.
III. It mandated government permission to change the product mix.
IV. It was highly effective in completely eliminating regional industrial inequalities.
V. It imposed restrictions on the import of capital goods and raw materials.
Which of the statements given above are correct?
I. It required government approval to set up new industrial units.
II. It regulated the expansion of capacity of existing industries.
III. It mandated government permission to change the product mix.
IV. It was highly effective in completely eliminating regional industrial inequalities.
V. It imposed restrictions on the import of capital goods and raw materials.
Which of the statements given above are correct?
Explanation
The Licence Raj was a comprehensive regulatory system that required government permission for setting up new units, expanding capacity, and changing product mixes. It also imposed strict restrictions on importing capital goods and raw materials. Although intended to reduce regional inequalities, the system was often criticized for its inefficiency and failure to achieve balanced industrial growth across all areas effectively.
Q13. Which international financial institution provided emergency structural adjustment loans to India during the 1991 crisis, conditional upon the implementation of economic reforms?
Explanation
During the severe balance of payments crisis in 1991, India approached the International Monetary Fund and the World Bank for financial assistance. These international institutions provided emergency structural adjustment loans to help stabilize the economy. The assistance was conditional upon India implementing a series of fundamental economic reforms, which eventually led to the adoption of the New Economic Policy.
Q14. Identify the correct pair regarding the components of the New Economic Policy 1991.
Explanation
In the 1991 New Economic Policy, liberalisation specifically refers to the removal of government-imposed restrictions on the entry and growth of the private sector. This involved abolishing industrial licensing and reducing barriers to trade. In contrast, stabilisation measures were short-term actions to control inflation, while structural reforms were long-term policies aimed at improving efficiency and competitiveness in the global market.
Q15. Read the following statements regarding the deregulation of industries under the New Economic Policy 1991:
I. Industrial licensing was abolished for all industries without exception.
II. The number of industries reserved for the public sector was drastically reduced.
III. The asset threshold limit for MRTP companies was removed.
IV. Phased manufacturing programs were abolished.
Which of the combinations given above is correct?
I. Industrial licensing was abolished for all industries without exception.
II. The number of industries reserved for the public sector was drastically reduced.
III. The asset threshold limit for MRTP companies was removed.
IV. Phased manufacturing programs were abolished.
Which of the combinations given above is correct?
Explanation
The 1991 industrial policy significantly deregulated the economy by reducing the number of industries reserved exclusively for the public sector. It also removed the asset threshold limit for companies under the MRTP Act, allowing for easier expansion. Additionally, phased manufacturing programs were abolished to simplify industrial operations. However, industrial licensing was not completely abolished for every single industry without any exceptions.
Q16. Currently, which among the following industries requires compulsory licensing in India?
Explanation
Following the deregulation started in 1991, industrial licensing is now required for only a very limited number of sectors. Currently, electronic aerospace and all types of defence equipment are among the few industries that still require compulsory licensing due to strategic and security considerations. Most other sectors, like automobiles, textiles, and building materials, have been fully deregulated to encourage investment.
Q17. The process of transferring the ownership, management, and control of a public sector enterprise to the private sector is formally known as:
Explanation
Privatisation involves the transfer of ownership, management, and control of public sector enterprises to the private sector. This can be achieved through various methods, including the sale of equity or the complete divestment of government holdings. The primary objective is to improve the efficiency, productivity, and competitiveness of these enterprises by subjecting them to market discipline and reducing government interference.
Q18. What does the term ‘Strategic Disinvestment’ specifically refer to in the context of Indian public sector undertakings?
Explanation
Strategic disinvestment refers to the sale of a substantial portion of the government’s shareholding in a central public sector enterprise, usually fifty-one percent or more. This process involves the transfer of management control to a private entity. Unlike minority stake sales, strategic disinvestment aims to bring in private sector professional management and technology to enhance the commercial viability and performance.
Q19. Which committee was constituted by the Government of India in 1999 to recommend legislation replacing the MRTP Act, leading to the Competition Act?
Explanation
The Government of India appointed the High Level Committee on Competition Policy and Law, headed by S.V.S. Raghavan, in 1999. The committee was tasked with recommending a modern legislative framework to replace the outdated MRTP Act. Its recommendations formed the basis for the Competition Act of 2002, which shifted the focus from curbing monopolies to promoting and sustaining healthy market competition.
Q20. Match List I with List II and select the correct answer.
| Reform Concept | Practical Measure |
|---|---|
| A. Liberalisation | i. Reduction of peak import tariff rates |
| B. Privatisation | ii. Control of inflation and balance of payment |
| C. Globalisation | iii. Disinvestment of equity in PSUs |
| D. Stabilisation | iv. Abolition of industrial licensing |
Explanation
Economic reforms are categorized into various operational concepts. Liberalisation was practically achieved through the abolition of industrial licensing, while privatisation involved the disinvestment of government equity in public enterprises. Globalisation focused on integrating the domestic economy with the world through measures like reducing import tariffs. Meanwhile, stabilisation measures aimed at the short-term control of inflation and managing the balance of payments.Answer key for these questions
| Q | Correct answer |
|---|---|
| 11 | (d) An unprecedented surplus in the current account balance |
| 12 | (b) I, II, III and V |
| 13 | (c) International Monetary Fund and World Bank |
| 14 | (d) Liberalisation - Removal of entry and growth restrictions on the private sector |
| 15 | (a) II, III and IV |
| 16 | (b) Electronic aerospace and defence equipment |
| 17 | (b) Privatisation |
| 18 | (a) Transfer of ownership and management control of a CPSE to a private entity |
| 19 | (c) Raghavan Committee |
| 20 | (a) A-iv, B-iii, C-i, D-ii |
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.