UPSC Prelims 2000·GS1·economy·economic sectors and development

Economic liberalisation in India started with

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  1. Asubstantial changes in industrial licensing policyCorrect
  2. Bthe convertibility of Indian rupee
  3. Cdoing away with procedural formalities for foreign direct investment
  4. Dsignificant reduction in tax rates

Explanation

The correct answer is A because the economic reforms of 1991, often referred to as the New Economic Policy, began primarily with the dismantling of the Industrial Licensing system, also known as the License Raj. Under the Industrial Policy Resolution of 1991, the government abolished industrial licensing for all projects except for a short list of strategic or hazardous industries. While tax reductions, currency changes, and FDI reforms were also part of the broader liberalisation process, the immediate and most fundamental shift that triggered the opening of the economy was the substantial change in industrial licensing policy, which allowed the private sector to expand and compete more freely.
economy: Economic liberalisation in India started with
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