Which statement best describes "globalisation" under economic reforms after 1991?
Show answer & explanation
Correct answer: C
Explanation
Solution: The correct answer is Integrating India with global market by reducing tariffs, export incentives, and FDI.
Explanation:
☛ Globalisation refers to the integration of the national economy with the world economy through the free flow of trade, capital, technology, and services.
☛ Under the New Economic Policy of 1991, India dismantled barriers to international trade by sharply reducing customs tariffs and phasing out quantitative restrictions (import quotas).
☛ Foreign investment policies were liberalised, introducing automatic approval for Foreign Direct Investment (FDI) and foreign technology agreements in high-priority industries.
☛ The rupee was devalued in July 1991 and later made fully convertible on the current account in 1994, which boosted exports and cross-border financial transactions.
Extra Exam-Relevant Facts:
☛ The 1991 reforms are popularly known as the LPG Model (Liberalisation, Privatisation, and Globalisation).
☛ The economic reforms were initiated under Prime Minister P. V. Narasimha Rao and Finance Minister Dr. Manmohan Singh.
☛ The immediate catalyst for these reforms was the severe Balance of Payments (BoP) crisis of 1991, when India's foreign exchange reserves fell to critical levels.
☛ FERA vs FEMA: The restrictive Foreign Exchange Regulation Act (FERA) of 1973 was replaced by the trade-facilitating Foreign Exchange Management Act (FEMA) in 1999.
☛ India became a founding member of the World Trade Organization (WTO) on 1 January 1995.
Important One-Liners for Upcoming Exams:
☛ Who was the Prime Minister of India during the 1991 economic reforms? → P. V. Narasimha Rao
☛ Who was the Finance Minister who presented the historic 1991 Union Budget? → Dr. Manmohan Singh
☛ In which year was the Foreign Exchange Management Act (FEMA) passed? → 1999
☛ On which account was the Indian Rupee made fully convertible in August 1994? → Current Account
☛ What does the acronym 'LPG' stand for in the 1991 economic policy? → Liberalisation, Privatisation, and Globalisation