Economic Policy of India Since 1991
Short Questions
1. What was the main reason for adopting the New Economic Policy (NEP) in 1991?
Answer: Economic crisis, low foreign reserves, and high inflation.
2. What does delicensing mean in the context of NEP 1991?
Answer: Removal of government licenses for starting businesses.
3. Name one industry that still requires compulsory licensing.
Answer: Defence equipment.
4. What is the purpose of the Securities and Exchange Board of India (SEBI)?
Answer: To protect investors and regulate the securities market.
5. What is disinvestment under privatization?
Answer: Selling shares of public sector units to private companies.
6. How many industries are currently reserved for the public sector?
Answer: Two (railways and atomic energy).
7. What is the role of the National Renewal Board (NRB)?
Answer: To compensate workers affected by the closure of public sector units.
8. What is the main aim of globalization in NEP 1991?
Answer: To integrate the Indian economy with the world economy.
9. Name one Navratna company mentioned in the policy.
Answer: Indian Oil Corporation (IOC).
10. What replaced the Foreign Exchange Regulation Act (FERA)?
Answer: Foreign Exchange Management Act (FEMA).
Long Questions
1. Why was the New Economic Policy of 1991 introduced in India?
Answer: India faced an economic crisis in 1991 with low foreign reserves, high inflation (16.7%), and a fiscal deficit. The NEP was introduced to stabilize the economy, promote growth, and integrate with global markets by reducing government control.
2. What is liberalization, and how did it help the Indian economy?
Answer: Liberalization means giving economic freedom to producers and consumers. It helped by removing restrictions like MRTP, allowing industries to expand, and introducing flexible interest rates, which boosted competition and growth.
3. How did the NEP 1991 encourage foreign investment in India?
Answer: The policy allowed Foreign Direct Investment (FDI) up to 51%, later increased to 74% and 100% in some industries. It opened high-priority sectors, encouraging foreign capital and technology to boost industrial growth.
4. What changes were made to the public sector under NEP 1991?
Answer: The number of industries reserved for the public sector was reduced from 17 to 8, and later to 2. Sick units were disinvested, and Navratna companies were given financial and managerial autonomy to improve efficiency.
5. What is privatization, and what steps were taken for it in NEP 1991?
Answer: Privatization means transferring public sector ownership to private hands. Steps included disinvestment of units like Maruti, dereservation of industries, and setting up the Board of Industrial and Financial Reconstruction (BIFR).
6. How did globalization affect the Indian ice-cream industry?
Answer: Globalization brought multinational ice-cream companies, offering more varieties and better delivery systems. It changed consumer preferences, increased demand, and supported growth due to improved cold chain infrastructure.
7. What are Special Economic Zones (SEZs), and how do they promote exports?
Answer: SEZs are areas with relaxed trade rules to boost exports. They offer incentives like tax benefits and easier import-export processes, encouraging businesses to produce and export goods efficiently.
8. What are the major achievements of the NEP 1991 in the IT sector?
Answer: The NEP led to a revolution in the IT sector, increasing India’s GDP. Indian software engineers gained global demand, and the sector became competitive, contributing significantly to economic growth.
9. What are the negative impacts of globalization on poor farmers in India?
Answer: Globalization benefits rich farmers growing exportable crops, but poor farmers struggle to compete. They face indebtedness, poverty, and are often forced to sell their land or take extreme steps.
10. How did reforms in the financial sector under NEP 1991 improve services?
Answer: The entry of private and foreign banks made the financial sector competitive. Services like credit cards and e-banking became faster and more professional, improving customer experience and efficiency.
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