The regulatory framework adopted by India between 1947 and 1990, often referred to as the "License Raj," aimed to direct economic activity. While it had certain intended benefits, what was a significant unintended negative consequence often associated with this system?
Show answer & explanation
Correct answer: A
Explanation
Correct Answer:
The creation of barriers to entry for new businesses potentially stifling innovation and leading to inefficiencies.
Explanation:
The License Raj was a system where businesses required multiple government licenses and approvals to operate.
Intended goal: Control resources, ensure balanced economic growth, and prevent monopolies.
Unintended negative consequences:
Entry barriers for new entrepreneurs
Slow decision-making due to heavy bureaucrace
Reduced competition, leading to inefficiency
Corruption and favoritism in granting licenses
Related Competitive Exam Questions:
Q1. The License Raj in India was largely abolished after which year?
Answer: 1991
Q2. Who is known as the architect of the 1991 economic reforms in India?
Answer: P. V. Narasimha Rao