Read the following Assertion (A) and Reason (R) carefully and choose the correct option:
Assertion (A): The New Economic Policy of 1991 led to more efficient and competitive markets in India.
Reason (R): Privatization reduced government control and improved productivity in public enterprises.
Show answer & explanation
Correct answer: A
Explanation
Correct Answer
Both A and R are true, and R is the correct explanation of A.
Explanation
The primary objective of the New Economic Policy (NEP) of 1991 was to make the Indian economy more open and efficient through Liberalization, Privatization, and Globalization (LPG). Assertion (A) is true because these reforms abolished the "License Raj" and encouraged foreign investment, thereby making the Indian market more competitive. Reason (R) is also true because, through the process of privatization, government control was reduced, which granted greater autonomy to public sector enterprises and led to improvements in their efficiency and productivity. Since privatization was the key factor that made the market competitive and the enterprises efficient, R is the correct and logical explanation of A.
Key Points
The economic reforms of 1991 are also known as the "Manmohan-Rao reforms." These policies transformed the Indian economy from a closed structure into one integrated at the global level. This change proved to be a milestone not only for the industrial sector but also for the service and financial sectors.
Important Questions and Answers
Question: What is the full form of 'LPG' under the economic policy of 1991?
Answer: Liberalization, Privatization, and Globalization.
Question: Who was the Finance Minister of India in 1991 who implemented these reforms?
Answer: Dr. Manmohan Singh.