COMPREHENSIVE WORKSHEET WITH SOLUTION

Part B: Indian Economic Development

Chapter 3: Liberalisation, Privatisation And Globalisation: An
Appraisal ECONOMIC REFORMS 1991
Q. NO QUESTION MARKS
1 Privatisation leads to fiscal consolidation (discipline) because of 1
a) Losses of the public sector enterprises are plugged
b) Revenue of the government rises on account of
disinvestment
c) Both a) & b)
d) Neither a) nor b)

2 The objectives of demonetization are to curb 1

a) Corruption
b) counterfeiting
c) the use of high denomination notes for terrorist
illegal activities
d) all of these

3 Assertion: New economic reforms are focussed on acceleration of GDP only, has 1
not generated sufficient employment opportunities indeed jobless growth is an
emerging challenge of the Indian economy.
Reason: Globalisation has increased the influx of foreign investment and foreign
technology which emphasis in labour saving technology
a) both assertion A and reason R are a true and reason are is the correct
explanation of assertion
b) both assertion A and reason R are true and reason is not the correct
explanation of assertion
c) assertion A is true but reason R is false
d) assertion A is false but reason R is true

4 World trade organisation agreement facilitate international trade through 1

a) providing greater market access to all non-member countries

b) removing tariff and non-tariff barriers to promote free trade to all its member
countries

c) both a and b
d) none of these
5 Devaluation of currency means: 1
a) fixing the value of currency in MNCs with the IMF
b) reduction in the value of domestic currency by the government
 c) The Indian rupee was devalued in 1991.
d) both b) & c)

6 Which of the following factor cause government to undertake programmes of 1

public sector reforms
a) economic inefficiency in the production Activities of the public sector
b) Rapid and unreasonable expansion of bureaucracy seek
c) lack of accountability and corruption
d) all of these

7 Statement 1: Under the Industrial reforms, there was delicensing of all industries. 1
Statement 2: Under Industrial sector reforms, the number of industries reserved
for the public sector was reduced from 17 to 3.
a) Both Statements are true.
b) Both Statements are false
c) Statement 1 is true but Statement 2 is false
Statement 2 is true but Statement 1 is false.
8 FDI in India mainly flow in ________ 1
a) Agriculture
b) Industry
c) Services
d) None of these

OR

Name any two taxes which were subsumed in goods and services tax (GST)

9 Statement 1: The process of globalisation has produced only negative results for 1
India.
Statement 2: Market-driven globalisation enhances the economic disparities
among nations and people.
a) Both Statements are true.
b) Both Statements are false.
c) Statement 1 is true but Statement 2 is false
d) Statement 2 is true but Statement 1 is false.

10 Identify the correct pair from the following 1

 Column 1 Column 2
A) New economic policy i) It was initiated
in 1989
B) Goods and services tax ii)It is introduced in
2018
C) Demonetisation iii) it was introduced in
2016
D) GATT iv) It was established in
1950
Alternative
a) A-i b) B-ii c) C-iii d)D-iv
11 Consider the following statements relating to Foreign Sector Reforms and mark 1
the correct combination:
1. It falls under the category of Liberalisation.
2. Liberalisation of trade policy was a major reform undertaken.
3. Devaluation of Indian rupee was another major reform.

A. ) Only 1
B. Only 1 and 2
C. All of the above
None of the above
12 Read the following statements and choose the correct alternatives: 1
Statement 1: Devaluation was adopted under fiscal reforms.
Statement-2: Determination of exchange value was left on free play under the
reforms of 1991.
A. Both are correct
B. Both are incorrect
C. Statement 1 is correct and statement 2 is incorrect.
Statement 1 is incorrect and statement 2 is correct
13 Read the following statements given below and choose the correct alternatives: 1
Assertion: Various reforms called Tax Reforms were introduced by
Government in 1991.
Reason: Government needed to reduce tax evasion and raise tax and non tax
revenue under 1991 reforms.
A. Both assertion and reason are true and reason is the correct explanation of
assertion.
B. Both Assertion and Reason are true and Reason is not the correct
explanation of Assertion.
C. Assertion is true but Reason is not.
Reason is true but Assertion is not true
14 Read the following statements given below and choose the correct alternatives: 1
Assertion: Globalisation led to the jobless growth in India.
Reason: Disinvestment policy is ineffective and a negative effect of economic
reforms.
A. Both assertion and reason are true and reason is the correct explanation of
assertion.
 B. Both Assertion and Reason are true and Reason is not the correct
explanation of Assertion.
C. Assertion is true but Reason is not.
Reason is true but Assertion is not true
15 Match the following items given in column A with those in column B. 1
Column A Column B
1. Abolition A. Financial
of industrial sector
licensing reforms
2. Reduction B.Foreign
in taxes Exchange
Reforms
3. Tax reforms
Establishment
of private
sector banks
4.Devaluation Industrial
of Rupee sector
reforms
16 Read the following statements given below and choose the correct alternatives: 1
Assertion: To overcome the economic crisis and accelerate the growth rate of
the Indian economy, the New Economic Policy was adopted by the govt. In
July 1991 with elements of Liberalisation, Privatisation, and Globalisation.
Reason: In 1991India met with an economic crisis relating to external de bt.The
government was not able to make repayments on its borrowings from abroad.
Foreign exchange reserves dropped to levels that were not sufficient for even a
fortnight.
A. Both assertion and reason are true and reason is the correct explanation of
assertion.
B. Both Assertion and Reason are true and Reason is not the correct
explanation of Assertion.
C. Assertion is true but Reason is not.
Reason is true but Assertion is not true
17 Read the following statements given below and choose the correct alternatives: 1
Assertion: The objective of the goods and services tax is to reduce tax evasion
and create one nation, one tax, and one market in India.
Reason: The parliament passed a law, the goods and services tax act 2016 to
simplify and introduce a unified direct tax system in India.
A. Both assertion and reason are true and reason is the correct explanation of
assertion.
B. Both Assertion and Reason are true and Reason is not the correct
explanation of Assertion.
C.Assertion is true but Reason is not.
D.Reason is true but Assertion is not true
18 Read the following statements given below and choose the correct alternatives: 1
Assertion: In order to manage the crisis, India approached the IMF and World
Bank which granted $7 Billion as a loan.
Reason: Foreign exchange reserves declined to its lowest level with a
reluctance from other countries to lend to India.
 B. Both assertion and reason are true and reason is the correct explanation of
assertion.
B.Both Assertion and Reason are true and Reason is not the correct explanation
of Assertion.
C.Assertion is true but Reason is not.
D.Reason is true but Assertion is not true

19 Read the following statements 1 and 2 and choose the correct alternatives: 1
Statement 1: Under economic reforms of privatization, the business and
production units were given freedom to
import capital goods to upgrade their technology.
Statement 2: Under economic reforms of liberalization, the need for licensing
was abolished.
(A) Both statements are true.
(B) Both statements are false.
(C) Only statement 1 is true.
(D) Only statement 2 is true.

20 Read the following statements – Assertion (A) and Reason (R). Choose one of 1
the correct alternatives given below:
Assertion (A): Every year government fixes a target for disinvestment of
Public Sector Enterprises (PSEs).
Reason (R): Disinvestment is an excellent tool for discarding the loss incurring
Public Sector Enterprises (PSEs).
Alternatives:
(A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
(B) Both Assertion (A) and Reason (R) are true and Reason (R) is not the
correct explanation of Assertion (A)
(C) Assertion (A) is true but Reason (R) is false.
(D) Assertion (A) is false but Reason (R) is true.

21 What is the aim of demonetization? 1

22 GST Council is a, what type of body? 1

o Constitutional body
o Autonomous body
o Federation body
o State body

23 Liberalization of the economy under the new economic policy (NEP) changed 1
the role of RBI in the economy
(A) From a ‘regulator ’to a ‘facilitator’ of the financial sector
(B) From a ‘controller’ to a ‘manager’ of the government debt
(C) Both (A) and (B)
(D) None of these

24 ASSERTION AND REASON 1

(A) Assertion - Under the financial sector reforms financial sector was
allowed to take decisions on after consulting RBI
 (R) Reason - The role of RBI was reduced from regulator to facilitator of
financial sector
ALTERNATIVE:-
(a) Both the Assertion and Reason are true and Reason is the correct
explanation of Assertion
(b) Both Assertion and Reason are true but Reason is not the correct
explanation of Assertion
(c) Assertion is true but Reason is false
(d) Assertion is false but Reason is true

25 Assertion (A). Indian economy has become a more vibrant economy. 1

Reason (R): Overall level of economic activity has trended up as indicated by
GDP growth .Post LPG policies, the growth of GDP shot up to as high as 8 per
cent per annum
a. Both Assertion (A) and Reason(R) are true, and Reason (R) is the correct
explanation ofAssertion (A).
b. Both Assertion (A) and Reason(R) are true, and Reason(R) is not the correct
explanationof Assertion (A).
c. Assertion (A) is true, but Reason (R) is false.
d. Assertion (A) is false but Reason(R) are true.

26 How does increase in fiscal deficit creates the requirement of 1

economic reforms?
.

27 Assertion (A): Government decided to develop Navratnas as global players in 1

their respective areas of industrialisation.
Reason(R): Navratnas were highly efficient profit making PSUs and were
revenue generators for the government
Alternatives:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the
correct explanation of explanation of Assertion (A)
(c) Assertion (A) is true but Reason (R) is false
d) Assertion (A) is false but Reason (R) is true

28 In the late 1980s, government expenditure began to exceed its revenue by such 1
large borrowings became unsustainable. Prices of to pay margins that meeting
the expenditure through many essential goods rose sharply. Imports grew at a
very high rate without matching growth of exports. Foreign exchange reserves
declined to a level that was not adequate to finance imports for more than two
weeks. There was also not sufficient foreign exchange the interest that needs to
be paid to international lenders. Also no country or international funder was
willing to lend to India. India approached the World Bank and the International
Monetary Fund (IMF) and received $7 billion as loan to manage the crisis. India
agreed to the conditionality of World Bank and IMF and announced the New
Economic Policy (NEP). This new set of policy measures changed the direction
of our development strategies.
 01)Which of the given reason is incorrect with regard to the introduction of
economic reforms in 1991 in India?
(a) a high level of fiscal deficit
(b) inflationary pressures
(c) persistent level of unemployment and poverty
(d) Depletion of the foreign exchange reserves

29 A system of hiring business services from the outside world is called 1

a. FDI
b. FII
c. Outsourcing
d. Trade agreement
30 Read following statements carefully and choose the correct option: 1
1. GST came into effect from 1st July 2017 in India.
2. The burden of indirect taxes cannot be shifted to the consumers.

Choose the correct option:

a. Only 1 is true
b. Only 2 is true
c. Both 1 and 2 are correct
Neither 1 nor 2 is correct
31 ‘Globalization is the outcome of liberalisation and privatisation strategies.’ 3
Explain.

32 Explain the adverse impacts of economic reforms on social justice and welfare 3
in India .

33 Mention three reasons for the public sector undertakings were sold off to the 3
private sector after 1991.

34 ‘Amaazon.com, a vast internet based enterprise has been outsourcing to various 3

customer support companies in India to accommodate more local and
international buyers and sellers.’ In light of the above statement, how has the
process of globalisation impacted the Indian economy?
35 Economic policy of 1991 stressed on removing unnecessary restrictions and 3
creating a more competitive environment to increase the interaction with the
world economy.Which values in your opinion have been realised as per new
economic policy?
36 Various fiscal reforms were initiated in the new economic policy of 1991. One 3
fiscal measure taken was to reduce taxes. How in your viewsis it justifiable?
37 Define privatization. Mention the ways by which a government company is 3
converted in to private company.
38 Define liberalization. Why liberalization was introduced in India? 3
39 Why India is a preferred destination for outsourcing? 3
40 What is meant by liberalisation? Mention any three steps taken by India in this 4
direction.
41 Explain four positive impacts of New economic policy 1991 4

42 Explain briefly the reforms in the financial sector and reforms in the foreign 4
trade sector under liberalisation policy.
43 The picture below depicts one of the outcomes of globalisation in Indian 4
economy.

Why did multinational corporations choose India for this process in post-reform
period?
44 Read the following passage and answer the following questions on the basis of 4
the same:
The opening up of the economy has led to rapid increase in foreign direct
investment and foreign exchange reserves. The foreign investment, which
includes foreign direct investment(FDI) and foreign institutional
investment(FII), has increased from about US $ 100 million in 1990-91 to US $
467 billion in 2012-13. There has been an increase in the foreign exchange
reserves from about US $ 6 billion in 1990-91 to about US $ 304 billion in
2013-14. India is one of the largest foreign exchange reserve holders in the
world. India is seen as a successful exporter of auto parts, engineering goods,
IT software and textiles in the reform period. Rising prices have also been kept
under control. On the other hand, the reform process has been widely criticised
for not being able to address some of the basic problems facing our economy
especially in the areas of employment, agriculture, industry, infrastructure
development and fiscal management.
1. Foreign Investment includes:(1)
A. Foreign Direct Investment.
B. Foreign Institutional Investment.
C. Both of the above
D. None of the above.
2. Foreign exchange reserves of India in post-reform period:(1)
A. Increased
B. Decreased
C. Remained constant
D. None of the above
Why was the reform(2) process criticised?
45 Read the following passage and answer the following questions on the basis of 4
the same:
 Foreign Portfolio Investors(FPIs) have stepped up purchase of Indian stocks in
the past six trading sessions following a meeting between Prime Minister
Narendra Modi and top overseas funds on November 5. These investors have
pumped in close to Rs. 30200 cr. since the meeting - where the govt.
Showcased recent reforms-as againstRs.21826 cr. In the whole of October.

In November so far , FPIs have invested Rs. 32777 cr. In domestic stocks,
driving the Sensex and Nifty to record highs recently.

“Lot of investors appreciated the reforms undertaken in agriculture and labour

markets and appreciated the opportunities India offered.” said a govt. Official.
Modi told the fund managers in the interaction that he is open to any feedback
the investors may have according to the official.

Modi’s pitch to global investors comes amidst loose monetary policy followed
by global central banks that has led to a chunk of that liquidity entering
emerging markets.

1. Reforms undertaken in agriculture and ………….(industry/labour) markets

have promoted foreign investments.
2. Inflow of liquidity in emerging markets is due to ……………..(strict/loose)
monetary policy.
3. Financial sector includes:
A. Investment Banks
B. Stock Exchange operations
C. Foreign Exchange Markets
D. All of these

4. Foreign Institutional Investors are:

A. Merchant bankers
B. Mutual Funds
C. Pension Funds
D. All of these

46 Critically examine the consequences of implementing GST in India. 4

47 Define disinvestment. Explain the purposes of disinvestment by the government 4
48 Explain the liberalization measures undertaken in the industrial sector of India 4
in the post reform period.
49 6

Interpret the above picture and given extract in terms of its role in the Indian
economy.
The central government has upgraded petroleum sector central public sector
enterprise (CPSE) Oil India Ltd (OIL) to Maharatna, taking the number of
Maharatnasto13.
 The move will impart enhanced powers to the OIL Board while taking financial
decisions.
OIL has annual turnover of Rs 41,039 crores and net profit of Rs 9,854 crores.
India now has 13 Maharatna,14 Navratna and 74 Miniratna CPSEs.
--The Economic Times -3 august 2023

i) Identify the image. With reference to the image choose the correct
option:
a) Public sector enterprises
b) Maharatna companies
c) both a) & b)
d) neither a) nor b)
ii) What status was granted to public sector enterprises to improve their
efficiency?
a) Maharatna
b) Navratna
c) Miniratna
d) all of these
iii) Do you think the navratna policy of the government helps in
improving the performance of PSEs in India?
iv) Some PSUs have been granted special status as navratnas and
miniratnas by the Government. Why did the government declare them
as navratnas?

50 Case-Study Based Questions 6

Read the following case study carefully and answer the questions with the below
reference context:

India, acclaimed for its technical expertise and an undying spirit of innovation,
has emerged as a leader for global ecommerce giants aspiring to optimise,
innovate, and ascend to greater heights. Be it intricate backend processes, cutting-
edge data analytics, or AI-fuelled insights to enhance customer interactions,
India's BPO sector is a true testament to capability and finesse.

But ecommerce goes beyond just online transactions. It encompasses the crafting
of an immersive user journey. As businesses lean into AI, VR, and myriad
 emerging technologies to redefine online retail, India's formidable IT talent
repository stands as an essential ally.

Yet, it's not solely about the tech. India's vast contingent of English-proficient
professionals, enriched by a deep-seated grasp of global consumer behaviour,
renders the nation uniquely equipped to deliver both backend efficacy and front-
end consumer delight.--- Deccan Chronicle, 27 Aug 2023.

Questions:

i) Name any two services outsourced from India

ii) Why outsourcing is good for India?
iii) Mention advantages which make India a favourite outsourcing
destination.
iv) Statement 1: Outsourcing is an offshoot of globalisation.

Statement 2: FDI leads to economic colonialism

a) Both Statements are true.

b) Both Statements are false
c) Statement 1 is true but Statement 2 is false.
d) Statement 2 is true but Statement 1 is false
v) Statement 1: India is often called as the outsourcing hub of the world

Statement 2: Availability of skilled manpower is one of the prime

factors responsible for the status gained by India at the international
platform

a) Both Statements are true.

b) Both Statements are false
c) Statement 1 is true but Statement 2 is false.
d) Statement 2 is true but Statement 1 is false.

51 Explain any four negative impacts of liberalisation and globalisation. 6

52 In his July 1991 Budget speech, marked by remarkable clarity, Dr Manmohan 6

Singh laid out his analysis of what was ailing the Indian economy at the time,
and his strategy to revive it.
His argument was that protection and state-supported industrialisation had
outlived their utility. The protection granted to industry had made it
uncompetitive in the global market. This had hurt export growth, contributing
to the Balance of Payments crisis of 1991. The way out, as Dr Singh saw it,
was to open up the Indian economy so that Indian manufacturers could
compete with global players in local conditions. Once they succeeded in the
domestic market they would be able to find a place in the global market as
well. India would then move from being, primarily, an exporter of
agricultural products to one that had a global presence in industrial products
as well.
 Questions:
1. Economic reforms have (Increased /reduced) the role of public sector.
2. When was New Economic policy brought in India? Which are three main
components of this new policy?
3. What was Economic reforms needed in Indian economy and write some
advantage of this policy? (1+2+4)

53 Owing to globalisation, you might find many Indian companies have expanded 6
their wings to many other countries. For example, ONGC Videsh, a subsidiary
of the Indian public sector enterprise, Oil and Natural Gas Corporation engaged
in oil and gas exploration and production has projects in 16 countries. Tata
Steel, a private company established in 1907, is one of the top ten global steel
companies in the world which have operations in 26 countries and sell its
products in 50 countries. It employs nearly 50,000 persons in other countries.
HCL Technologies, one of the top five IT companies in India has offices in 31
countries and employs about 15,000 persons abroad. Dr Reddy's Laboratories,
initially was a small company supplying pharmaceutical goods to big Indian
companies, today has manufacturing plants and research centres across the
world.

Questions:(3+3)
Q.1. Define Globalization ? Which is the most important outcome of the
process of Globalization ? What type of services are generally outsourced?
Q.4. Write some positive arguments about globalisation.
54 1. Read the given excerpt and answer questions. (03+03) 6
The economic liberalisation in India refers to the opening of the
country's economy to the world with the goal of making the economy
more market and service-oriented and expanding the role of private and
foreign investment. Indian economic liberalisation was part of a general
pattern of economic liberalisation occurring across the world in the late
20th century. Although some attempts at liberalisation were made in
1966 and the early 1980s, a more thorough liberalisation was initiated in
1991. The reform was prompted by a balance of payments crisis that
had led to a severe recession and also as per structural adjustment
programs for taking loans from IMF and World Bank. Through reform,
India overcame its worst economic crisis in the remarkably short period
of two years. Specific changes included reducing import tariffs,
deregulating markets, and reducing taxes, which led to an increase in
foreign investment and high economic growth in the 1990s and 2000s.
From 1992 to 2005, foreign investment increased 316.9%, and India's
gross domestic product (GDP) grew from $266 billion in 1991 to $2.3
trillion in 2018 According to one study, wages rose on the whole, as
well as wages as the labor-to-capital relative share. As an effect of the
liberalisation in 1991, Poverty reduced from 36 percent in 1993-94 to
24.1 percent in 1999-00. India also increasingly integrated its economy
with the global economy. The ratio of total exports of goods and
 services to GDP in India approximately doubled from 7.3 percent in
1990 to 14 percent in 2000. This rise was less dramatic on the import
side but was significant, from 9.9 percent in 1990 to 16.6 percent in
2000. Within 10 years, the ratio of total goods and services trade to
GDP rose from 17.2 percent to 30.6 percent. Liberalisation policies of
Indian government have been criticised for increasing inequality and
concentration of wealth. The reforms have also been criticised for
worsening rural living standards and unemployment and increasing
farmer suicides. (Source: Wikipedia)
a) State the meaning of liberalisation and what steps were taken to
liberalized Indian economy?
b) Justify the following statement with valid explanation:
“liberalisation enabled sufficient economic development
opportunities and world’s fastest growing economy”.

55 Why was New Economic Policy introduced in India in the year 1991? 6
56 “We have everything by globalization, we have noting by globalization”. 6
Explain
57 Explain the merits and demerits of Privatization in India. 6

ANSWER
1 C
2 D
3 A
4 B
5 D
6 D
7 D
8 C OR central excise duty, service tax, VAT
9 D
10 C
11 C.)All of the above

12 D.Statement 1 is incorrect and Statement 2 is correct.

13 Both assertion and reason are true and reason is the correct explanation of assertion.
14 D.Reason is true but Assertion is not true
15 1...--…D
2.…….C
3.…….A
4.…….B
16 Both assertion and reason are true and reason is the correct explanation of assertion.
17 C.Assertion is true but Reason is false
18 A.Both assertion and reason are true and reason is the correct explanation of assertion
19 (D) Only statement 2 is true.
20 (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)

21 The aim is to stop the circulation of black money in the market. To help in reducing the interest
rates of prevalent banking system. To help in creation of cashless economy.

22 Constitutional Body

23 (A) from a ‘regulator’ to a ‘facilitator’ of the financial sector

24 (d) Assertion is false but reason is true.

25
a. Both Assertion (A) and Reason(R) are true, and Reason (R) is the correct explanation
ofAssertion (A).

26 Due to increasing fiscal deficit the interest paid by the Govt. for the borrowings become 36.4%
of the Govt. expenditure. So economic
reforms become essential for the Government.
27 (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
assertion (A)

28 c) persistent level of unemployment and poverty

29 c. Outsourcing

30 A. Only 1 is true

31 Globalisation refers to the growing interdependence of countries worldwide through the

increasing volume and variety of cross border transactions in goods and services and also
through the more rapid widespread diffusion of technology. Globalization is the outcome of the
policies of liberalization and privatization. One of the most important outcomes of the
globalization process is the outsourcing of services. Globalization is an opportunity in terms of
greater access to global markets, high technology and increased possibility for the large
industries of developing countries to become international players.
Skilled labour with cheaper rates of India’s population is a big factor in making it a source of
outsourcing. India has invested heavily in technical education and can provide a ready supply of
bright people at relatively low cost.

32 New economic reforms 1991 in India introduced against the background of deep-rooted
inequalities:
● Increase in inequality of income: This policy resulted more in the increase of the income
and quality of consumption of the high-income groups.
 ● Variation in sector-growth: The growth mainly concentrated on certain selected areas
in the service sectors like telecommunications IT finance entertainment travel etc.
This has taken place at the cost of the vital sectors of the economy like agriculture and industry
which is an important source of livelihood to the majority of people in our country. Thus, it
would be correct to state that the reforms have compromised the welfare of the people. This has
proven just contrary to the goal of equity.

33 Reasons for the public sector understandings were sold off to the private sector:
● the purpose was mainly to improve financial discipline and facilitate modernization
● it was also envisaged that private capital and managerial capabilities could be
effectively utilised to improve the performance of the PSUs.
● The government envisaged that privatisation could provide strong impetus to the inflow
of FDI

34 1. It generates more employment and job opportunities.

2. It raises the overall GDP of the country.
It leads to formalisation of the employment sector.
35 Answer:
1. Liberalisation aims at liberating the trade and industry from unwanted restrictions and
provides greater autonomy to investment enhancing spirit of competitiveness and open
mindedness.
2. Privatization aims at introduction of private ownership in publicly owned and managed
enterprises and thus promotes efficiency of the private sector.
Globalisation aims at opening up the economy to the world market and thus motivating the
developing economy like India to face the challenge of international discipline.
36 Before 1991, both direct and Indirect taxes were high . According to new economic policy of
1991, taxes were reduced to
A. Discourage tax evasion.
B. Provide incentive to honest tax payers
Inculcate good values among the tax payers to cooperate with the govt. In meeting its public
expenditure.
37  Privatization implies shedding of ownership or management of a government owned
enterprise Privatization is possible by three ways  By withdrawal of the government from
ownership and management of public sector companies. and or  Selling off part of equity of
PSEs to the public (Disinvestment) . and or  By outright sale of public sector companies
38 Liberalization is the lessening of government regulations and restrictions in an economy in
exchange for greater participation by private entities. Liberalization was introduced in Indian
economy due to the following reasons.  Most of the economic reforms were forced upon
India as a part of the IMF bailout.  A Balance of Payments crisis in 1991 pushed the country
to near bankruptcy.  In return for an IMF bailout, gold was transferred to London as
collateral, the rupee devalued and economic reforms were forced upon India.
39 India is the best destination of outsourcing due to the following reasons:  In India the
outsourcing services (manpower) are available at a cheaper cost with reasonable degree of skill
and accuracy.  With India, you will not face any language or communication barriers as India
 is one of the largest English speaking nations in the world. Indian people are fluent in the
English language and it encourages outsourcers to choose India as their outsourcing
destination  .Indians are computer/technology savvy  Favourable government policies, fast-
developing infrastructure and an immensely talented workforce.  India is fully capable to
handle complex turnkey projects effortlessly utilizing its skilled resources and state-of-the-art
technology.
40 Liberalisation refers to the freedom of the economy from the direct controls imposed by the
government.
Steps:
i) De-licensing of industries' new economic policy abolished the system of industrial
licensing except for those industries which were of strategic concern.
ii) Amendment of MRTP Act: The government removed the restrictions monopolies
and restrictive trade practices act
iii) Tariff and non-tariff barriers such as quantitative restrictions to trade were removed
under liberalisation in trade and investment
iv) Liberalisation in the financial sector led to reduced tax rates and more freedom to
financial institution in their lending and deposit policies

41 Positive impacts of new economic reform 1991:

● Vibrant economy: overall level of economic activity has trended up as
indicated by GDP growth. Post LPG policies the growth of GDP increased
from 5.6% during 1980-91 to 8.2% during 2007-12
● stimulant to industrial production: It is owing to these policies that IT
industry in India has achieved global recognition
● increase in foreign exchange reserve: forex reserves of the country have now
reached a comfortable level. While in 1990- 91 the forex was US $6 billion,
in 2018-19 these reserves increased to US dollar 413 billion while at the end
of December 2021 these rose to US $633.614 billion. Good amount of forex
reserve enhances economic confidence of the global investors in the Indian
markets
● Check on fiscal deficit: mounting fiscal deficit has been a serious threat to
the process of investment in the Indian economy. From as high as 8.5% of
GDP has been brought down to around 3.5% of GDP

42 ● Main reforms in the financial sector were

i) A reduced control of RBI and commercial banks be statutory deputy ratio

and cash reserve ratio reduced see free determination of interest rate by
the market forces of demand and supply
ii) foreign investment limit in banks increased

● Main reforms in the foreign trade sector were:

i) Dismantling of quantitative restriction on imports and exports

 ii) reduction of tariff rates
iii) removal of licensing procedures from imports

43 They can avail at a cheaper cost with reasonable degree of skill and accuracy. The low wage
rates and availability of skilled manpower in India have made it a destination for global
outsourcing in the post-reform period.
44
1.C) Both of the above
2. A) Increased
the reform process has been widely criticised for not being able to address some ofthe basic
problems facing our economy esepecially in the areas of employment, agriculture, industry,
infrastructure development and fiscal management.
45 1. Labour
2. Loose
3. All of these
4. All of these

46 The implementation of GST has both advantages and disadvantages in Indian economy.
Advantages /Benefits of GST  Wider tax base , necessary for lowering the tax rates and
eliminating classification disputes  Elimination of multiplicity of taxes and their cascading
effects  Rationalization of tax structure and simplification of compliance procedures 
Eliminates the multiplicity of taxation Disadvantages/demerits of GST  Businesses are
required to register for GST in each state they operate in  New start-ups or small businesses
who lack knowledge of GST may require hiring professionals for managing their taxes 
Luxury items to get costly  Right after implementation of demonetization bill and now GST
bill India’s economy will take approximately 1-2 years to become stable
47  Selling off part of equity of PSEs to the public is called disinvestment. The purposes of
disinvestment by the government are :  To improve financial discipline  To facilitate
modernization  To improve performance of PSUs  To provide strong impetus to the inflow
of FDI
48 Answer: Industrial sector reforms  Industrial licensing was abolished for all projects except in
18 industries. (Alcohol, cigarettes, drugs & pharmaceuticals, hazardous chemicals, industrial
explosives , electronics , aerospace etc.)  Areas reserved for the public sector were narrowed
down and greater participation by private sector was permitted in core and basic industries.
The new policy reduced the number of areas reserved from 17 to 8. These eight are mainly
those involving strategic and security concerns. (Example, railways, atomic energy generation,
defence equipments etc.)  The policy encouraged disinvestment of government holdings of
equity share capital of public sector enterprises.  The public sector units were provided
greater autonomy and professional management
49 i) C
ii) D

iii) Navratan policy of the government helps in improving the performance of PSU in India. In
the liberalised global environments, the government gave greater managerial and operational
autonomy in taking various important decisions to run the company efficiently and thus enhance
 their profits. At present India has 13 Maharatna,14 Navratna and 74MiniratnaCPSEs.

iv. To improve efficiency, infuse professionalism and enable PSEs to compete more effectively
in the liberalised global environment and the government declared 9 PSUs as navratnas in 1996

50 i. a) Voice based business processes like call centres, b) record keeping

ii. Outsourcing is good for India as it provides employment to large number of unemployed
Indians.

iii. India has become a favourite outsourcing destination because in India, work can be
performed at a cheaper cost with reasonable degree of skill and accuracy.

iv)a

v)a

51 The new economic reforms have been criticised on various grounds:

● Acute Inequality: A Biggest consequence is acute inequality. the new reforms 1991 have
increased the income of only high-income groups and the poor have been left out of the
benefits of the reforms.
● Variation in economic growth: It is among the Indian States and between the States and
between the rural and urban areas. The growth has been concentrated only in some
selected areas in the service sector such as telecommunication, travel, hospitality
services etc.
● Jobless growth: Globalisation which brought about free movement of goods and
services from rest of the world has had an adverse effect on the domestic industries and
thereby employment opportunities. Job creation in the urban technology sector does
little to create economic gains for India’s rural poor which marks as jobless growth
● Decline in agricultural growth: This sector has suffered a serious neglect and its growth
rate has slipped to a miserably low level due to lack public investment esp. in
infrastructure, withdrawal of subsidies, cut in import duties, shift in cropping pattern
● Adverse situation for small farmers this reform forced the small farmers to compete in a
global market where prices of agricultural goods have fallen. reduction of government
subsidies has made farming more expensive
● Inadequate public investments in infrastructure: Rural areas are unable to invite massive
private participation in its development due to lack of investment in roads and irrigation.
Any four
52 Answer:
1. Reduced
2. In July 1991. Three components- Liberalisation, Privatization,Globalisation
3. Need:
1. Protection and state-supported industrialisation had outlived their utility.
2. The protection granted to industry had made it uncompetitive in the global market.
3.This had hurt export growth, contributing to the Balance of Payments crisis of 1991

Advantages:
1. To open up the Indian economy so that Indian manufacturers could compete with global
players in local conditions.
2. India would then move from being, primarily, an exporter of agricultural products to
one that had a global presence in industrial products as well.

53 Answer:
1.
Globalisation refers to the integration of domestic economy with the global world.
The most important outcome of the process of globalisation is outsourcing,greater access to
global markets and access to advanced technology.
Generally outsourced services are customer service,It management,accounting etc.
3. Some positive arguments about globalisation:
A. Access to global markets.
B. The spread of innovation and technology
C. Lower cost of production.
D. Exchange of culture etc.

54 Answer:
1. It refers to the opening of the country's economy to the world with the goal of making the
economy more market and service-oriented and expanding the role of private and foreign
investment.
Some of the steps taken for liberalisation are:
A. reducing import tariffs
B. deregulating markets
C. reducing taxes etc.

2.
1. From 1992 to 2005, foreign investment increased 316.9%, and India's gross domestic
product (GDP) grew from $266 billion in 1991 to $2.3 trillion in 2018
2. Poverty reduced from 36 percent in 1993-94 to 24.1 percent in 1999-00.
3. The ratio of total exports of goods and services to GDP in India approximately doubled
from 7.3 percent in 1990 to 14 percent in 2000.
Within 10 years, the ratio of total goods and services trade to GDP rose from 17.2 percent to
30.6 percent.
55 In the middle of 1991, need for major economic reforms were felt in the country. These were
urgently needed to bring U-turn in the economy. It was mainly due to following reasons : 
Excessive fiscal deficit: In our planned economic development, anticipated expenditure was
always in excess of anticipated receipts resulting into fiscal deficit. It increased to 8.5% of
GDP in 1991 as against 5% in 1981-82  Balance of payment deficit: Deficit in balance of
 payment means when foreign payments are in excess of foreign receipts. In India, it mounted
from Rs.2214 crores in 1980-81 to Rs.17367 crores in 1990- 91.  Rise in prices: After 1960-
61, prices of all commodities continued to rise. The situation became serious when the rate of
inflation arose from 6.7% to 16.7%.  Reduction in foreign exchange reserves: At one time,
during 1990-91, foreign exchange reserves fell to a lower level of Rs. 2400 crores, which was
just enough for the payments of three weeks imports. The crisis was so serious that
government had to mortgage gold reserves with other countries to pay off interest and foreign
debts.  Poor performance of public sector: Government of India expanded public sector in a j
huge way during 1951-1991, but their return was negligible. So, it was the need of the hour to
shift it to the private sector instead of public sector. India approached the International Bank
for reconstruction and Development (IBRD), popularly known as World Bank and the
International Monetary Fund (IMF), and received $7 billion as loan to manage the crisis. For
availing the loan, these international agencies expected India to liberalise and open up the
economy by removing restrictions on the private sector, reduce the role of the government in
many areas and remove trade restrictions between India and other countries. India agreed to
the conditionalities of World Bank and IMF and announced the New Economic Policy (NEP)
in the year 1991.
56 There is sparkling prosperity, there is stinking poverty. “We have dazzling five star hotels side
by side with darkened ill-starred hovels”. We have everything by globalization, we have
noting by globalization. These critics imply that we have achieved many things by
globalization and we have also lost many things due to globalization. Let’s discuss these.
Achievements:  The opening of the economy has led to a rapid increase in foreign direct
investment and foreign exchange reserves.  The foreign investment, which includes foreign
direct investment (FDI) and foreign institutional investment (FII), has increased from about
US $100 million in 1990-91 to US $ 30 billion in 2017- 18.  There has been an increase in the
foreign exchange reserves from about US $ 6 billion in 1990- 91 to about US $ 413 billion in
2018-19.  India is one of the largest foreign exchange reserve holders in the world. India is
seen as a successful exporter of auto parts, engineering goods, IT software and textiles in the
reform period.  Rising prices have also been kept under control. Losses: • Loss of Domestic
industries: - as a result of Globalization foreign competition has increased in India. Because of
better quality and low cost of foreign goods, many Indian industrial units have failed to face
competition and have been closed. • Problem of Unemployment: - as a result of globalization
foreign companies or even some Indian companies use capital intensive technology. With the
increasing use of capital intensive technology the employment opportunities are reduced and
increase the problem of unemployment in Indian economy. • Exploitation of Labour: -
Globalization is exploiting unskilled workers by giving lower wages, less job security long
working hours and worse working condition. • Increase in Inequalities: - globalization has
benefited MNCs and big industrial units but small and cottage industries are adversely hit by
it. It has increased inequalities in India.
57 Positive Impacts • State owned enterprises usually are outdone by the private enterprises
competitively. When compared the latter show better results in terms of revenues and
efficiency and productivity. Hence, privatization can provide the necessary impetus to the
underperforming PSUs. • Privatization has a positive impact on the financial health of the
sector which was previously state dominated by way of reducing the deficits and debts •
Privatized enterprises provide better and prompt services to the customers and help in
improving the overall infrastructure of the country. Negative Impacts • Private sector focuses
more on profit maximization and less on social objectives unlike public sector that initiates
socially viable adjustments in case of emergencies and criticalities • Privatization loses the
mission with which the enterprise was established and profit maximization agenda encourages
malpractices like production of lower quality products, elevating the hidden indirect costs,
price escalation etc. • Privatization results in high employee turnover and a lot of investment is
required to train the lesser-qualified staff and even making the existing manpower of PSU
abreast with the latest business practices