Under the 1991 economic reforms, reducing government equity in Public Sector Undertakings and selling shares to private entities was a mechanism of:
Show answer & explanation
Correct answer: C
Explanation
Solution: The correct answer is Privatisation.
Explanation:
☛ Under the 1991 New Economic Policy (NEP), the government introduced LPG (Liberalisation, Privatisation, and Globalisation) reforms to overcome a severe balance of payments crisis.
☛ Privatisation refers to the transfer of ownership, management, and control of public sector enterprises to the private sector.
☛ Diluting or selling government equity in Public Sector Undertakings (PSUs) to private entities or the general public is termed Disinvestment, which served as a primary instrument of privatisation.
☛ The main objective of this process was to improve financial discipline, foster competitiveness, and modernize public enterprises.
Extra Exam-Relevant Facts:
☛ Liberalisation: Aimed at ending government restrictions, ending the 'Licence Raj', and deregulating trade and industry.
☛ Globalisation: Aimed at integrating the national economy with the world economy through free trade, capital flow, and technology transfer.
☛ Nationalisation: The process of bringing privately owned assets or companies under public ownership, such as the nationalisation of 14 major commercial banks in 1969.
☛ The 1991 economic reforms were initiated under Prime Minister P. V. Narasimha Rao and Finance Minister Dr. Manmohan Singh.
Important One-Liners for Upcoming Exams:
☛ On which date was the New Industrial Policy announced in India? → 24 July 1991
☛ Who was the Prime Minister of India during the 1991 economic reforms? → P. V. Narasimha Rao
☛ What term is used for selling government shares in public sector units? → Disinvestment
☛ In which year were 6 more commercial banks nationalised in India? → 1980
☛ What does the acronym 'LPG' stand for in the context of the 1991 reforms? → Liberalisation, Privatisation, and Globalisation