What were the main reforms undertaken under the New Economic Policy of the early 1990s ? 1. Trade liberalization 2. Public Sector Disinvestment 3. Poverty Alleviation 4. Rapid industrialization Select the answer using the code given below :
- A.1 only
- B.3 and 4
- C.1 and 2
- D.2 and 4
Correct answer
Explanation
The correct answer is C, 1 and 2. The New Economic Policy of 1991 rested on liberalisation, privatisation and globalisation, and trade liberalisation and public sector disinvestment were among its main measures.
Faced with a balance of payments crisis in 1991, the government of P. V. Narasimha Rao, with Manmohan Singh as Finance Minister, devalued the rupee, cut import tariffs and quantitative restrictions, and abolished industrial licensing for most industries. It reduced the number of industries reserved for the public sector and began selling part of the government's shareholding in public sector undertakings, which is disinvestment. Foreign direct investment was welcomed and the financial sector was reformed on the advice of the Narasimham Committee.
Why the others are wrong: A, it leaves out disinvestment, which was a core reform. B, poverty alleviation and rapid industrialisation were long-standing goals of the planning era, not the defining reforms of 1991. D, rapid industrialisation was the aim of the Second Five Year Plan's Mahalanobis model, not a reform measure of the NEP.
Exam tip: NEP 1991 means LPG (liberalisation, privatisation, globalisation); Narasimha Rao and Manmohan Singh.
Practice Questions
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- B.Fifteenth Finance Commission
- C.Fourteenth Finance Commission
- D.Twelfth Finance Commission
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