Q21. Which department under the Ministry of Finance is responsible for managing the central government’s investments and executing disinvestment plans?
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 21–30 of 91 questions
Q22. Which of the following represents the correct chronological sequence of industrial policy reforms in India?
Explanation
The evolution of India’s industrial policy follows a distinct timeline starting with the foundational Industrial Policy Resolution of 1956. This was followed by the enactment of the MRTP Act in 1969 to control monopolies. Significant changes occurred with the New Economic Policy in 1991, which introduced liberalisation. Finally, the Competition Act was passed in 2002 to modernize the competition regulatory framework.
Q23. Integration of the domestic economy with the world economy is achieved primarily through which of the following measures?
Explanation
Globalisation is the process of integrating the domestic economy with the world economy through various market-oriented measures. This is achieved by promoting the free flow of goods, services, capital, and technology across international borders. Reducing trade barriers, such as import tariffs and quotas, and encouraging foreign direct investment are key strategies that facilitate this integration, allowing firms to compete globally.
Q24. With reference to globalization in India, which of the following statements about ‘Quantitative Restrictions’ is correct?
Explanation
In the context of globalization, India committed to removing quantitative restrictions on imports to comply with international trade obligations. These restrictions, which limited the physical volume of goods that could be imported, were systematically phased out. By 2001, India had removed quantitative restrictions on most consumer goods and agricultural products, replacing them with tariffs to protect domestic industries and trade.
Q25. Read the following statements regarding the evolution of FDI policy in India post-1991:
I. Initially, automatic approval was granted up to 51% foreign equity in high-priority industries.
II. The Foreign Investment Promotion Board (FIPB) was established to process single-window clearances.
III. FIPB remains the sole authority for all FDI approvals in India today.
Which of the statements given above are incorrect?
I. Initially, automatic approval was granted up to 51% foreign equity in high-priority industries.
II. The Foreign Investment Promotion Board (FIPB) was established to process single-window clearances.
III. FIPB remains the sole authority for all FDI approvals in India today.
Which of the statements given above are incorrect?
Explanation
Post-1991, India’s FDI policy evolved from restrictive to highly liberalized. Initially, automatic approval was granted for up to 51% foreign equity in priority sectors, and the Foreign Investment Promotion Board was established for single-window clearances.
Q26. In which of the following sectors is Foreign Direct Investment (FDI) strictly prohibited in India?
Explanation
While India has liberalized most sectors for foreign investment, certain areas remain strictly prohibited for Foreign Direct Investment due to security, ethical, or social reasons. These prohibited sectors include atomic energy and the lottery business, which includes government or private lotteries and online lotteries. Additionally, activities like gambling, betting, and chit funds are also on the negative list for foreign investment.
Q27. Under the current FDI policy, what is the foreign direct investment limit allowed through the automatic route in the defense manufacturing sector (subject to certain conditions)?
Explanation
Under the current Foreign Direct Investment policy, the Indian government has significantly increased the limits in the defense sector to boost domestic manufacturing. Foreign investors can now invest up to 74% through the automatic route, meaning no prior government approval is required, provided they meet certain security conditions. Beyond 74%, investment is still permitted but requires prior approval through the government route.
Q28. Given below are two statements, one is labelled as Assertion (A) and the other is labelled as
Reason (R).
Assertion (A): The government route for FDI approval requires prior consent from the respective ministries or departments.
Reason (R): The automatic route does not require prior approval from the Government of India or the Reserve Bank of India, provided the investor notifies the RBI post-investment.
Which of the following is correct?
Reason (R).
Assertion (A): The government route for FDI approval requires prior consent from the respective ministries or departments.
Reason (R): The automatic route does not require prior approval from the Government of India or the Reserve Bank of India, provided the investor notifies the RBI post-investment.
Which of the following is correct?
Explanation
Foreign Direct Investment in India enters through two primary channels: the government route and the automatic route. The government route necessitates prior consent from the relevant sectoral ministries. Conversely, the automatic route allows investment without any prior approval from the central government or the Reserve Bank of India. While both statements are factual, they describe distinct mechanisms rather than providing causal explanations.
Q29. Which scheme was introduced by the Government of India in 2000 to replace the earlier Export Processing Zones (EPZs) in order to provide an internationally competitive and hassle-free environment for exports?
Explanation
In the year 2000, the Government of India introduced the Special Economic Zones scheme to address the shortcomings of the earlier Export Processing Zones. The objective was to create an internationally competitive and hassle-free environment for exports. These zones are specifically delineated duty-free enclaves and are treated as foreign territories for trade operations, providing various fiscal incentives to attract large-scale investment.
Q30. Match List I with List II and select the correct answer.
| FDI Route/Concept | Description |
|---|---|
| A. Automatic Route | i. Building new production facilities from the ground up |
| B. Government Route | ii. Purchasing or leasing existing production facilities |
| C. Greenfield Investment | iii. Investment without prior central government approval |
| D. Brownfield Investment | iv. Investment requiring prior approval from sectoral ministries |
Explanation
Foreign investment mechanisms are defined by their approval processes and the nature of the assets acquired. The automatic route requires no prior central government approval, whereas the government route necessitates it. In terms of physical investment, greenfield projects involve building entirely new production facilities from the ground up. In contrast, brownfield investments involve the acquisition or leasing of existing industrial production facilities.Answer key for these questions
| Q | Correct answer |
|---|---|
| 21 | (c) Department of Investment and Public Asset Management (DIPAM) |
| 22 | (b) IPR 1956 MRTP Act New Economic Policy Competition Act |
| 23 | (d) Promoting free flow of goods, services, capital, and technology across borders |
| 24 | (a) Removal of quantitative restrictions on consumer goods by 2001. |
| 25 | (c) III only |
| 26 | (a) Atomic Energy and Lottery Business |
| 27 | (c) 74% |
| 28 | (b) Both A and R are true but R is not the correct explanation of A. |
| 29 | (c) Special Economic Zones (SEZ) Scheme |
| 30 | (a) A-iii, B-iv, 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.