Before 1991, which policy limited private sector participation in certain industries?
Show answer & explanation
Correct answer: A
Explanation
Correct Answer:
Industrial Licensing Policy
Explanation:
Before the landmark economic reforms of 1991, India followed a regime of strict state control over industry, famously known as the License Raj. The Industrial Licensing Policy required private companies to obtain government permits (licenses) not only to establish a new manufacturing unit but also to expand capacity, diversify production, or shift locations. This heavily restricted private sector participation, reserved core heavy industries primarily for the public sector, and curbed market competition.
Key Points:
The New Economic Policy of 1991 introduced Liberalization, Privatization, and Globalization (LPG reforms), which significantly dismantled industrial licensing except for a small list of strategic or hazardous sectors. This policy shift paved the way for rapid industrial growth, foreign direct investment, and private entrepreneurship in India.
Important Questions and Answers:
Question: What popular term was used to describe the rigid bureaucratic system of controls on Indian industries before 1991?
Answer: License Raj.
Question: What are the three core components of the economic reforms introduced in India in 1991?
Answer: Liberalization, Privatization, and Globalization (LPG).