SSC Selection Post 2025 PYQ — Question 6

Correct Answer

Removal of licensing procedures for imports

Explanation

Following the economic crisis in 1991, the Government of India adopted the LPG (Liberalization, Privatization, and Globalization) policy. The primary objective of the trade policy reforms was to integrate the Indian economy with the global market and make domestic industries competitive.

Under these reforms, the old 'License Raj' was dismantled, and quantitative restrictions as well as complex import licensing systems were completely removed. Except for a few items restricted due to environmental, security, and strategic reasons, the free import of most goods was permitted.

Key Points

The main focus of the 1991 trade reforms was on import liberalization.

Licensing procedures for imports were abolished on a large scale.

Import tariff rates were drastically reduced to facilitate the easy import of foreign technology and raw materials.

To regulate foreign exchange and boost exports, the Indian Rupee was also devalued.

Additional Facts

Prior to the 1991 reforms, India followed a policy of 'Import Substitution', which imposed heavy duties and quotas on imports to protect domestic industries.

Export duties were removed under the reforms to promote export growth.

As a result of these trade policy reforms, India was later able to become a founding member of the newly formed World Trade Organization (WTO) in 1995.

Important Questions

Question: Who was the Finance Minister of India during the economic reforms of 1991?

Answer: Dr. Manmohan Singh.

Question: Which system was abolished under the new trade policy of 1991?

Answer: Import licensing and quantitative restrictions.