SSC Stenographer 2025 PYQ — Question 15

The correct answer is Option 4: It increased foreign investment by improving the investment climate.

Detailed Analysis & Solution

In the Indian economic context, reforms are generally categorized into two phases. While the First Generation Reforms (1991) focused on crisis management and liberalization (LPG), the Second Generation Reforms (initiated around 1999-2000) focused on deeper structural changes.

Impact on Foreign Investment

Structural Deepening: These reforms targeted the "ease of doing business" rather than just opening doors. They simplified the tax structure, introduced the Fiscal Responsibility and Budget Management (FRBM) Act, and initiated labor reforms.

Sectoral Opening: Many sectors that were previously restricted or had low caps (like Insurance, Telecom, and Civil Aviation) saw an increase in Foreign Direct Investment (FDI) limits.

Institutional Strengthening: Laws like the Competition Act, 2002 replaced the restrictive MRTP Act, creating a level playing field for foreign and domestic companies alike.

Investment Climate: By focusing on infrastructure development (like the Golden Quadrilateral) and legal transparency, these reforms made India a more attractive and stable destination for global capital.

Potential Competition Questions

Q1. Which of the following acts replaced the Monopolies and Restrictive Trade Practices (MRTP) Act during the reform period?

Answer: Competition Act, 2002

 

Q2. The 'Automatic Route' in FDI refers to:

Answer: Investment without prior approval from the RBI or Government.