Consider the following statements regarding the deregulation of the industrial sector under the 1991 reforms: 1. Industrial licensing was abolished for all product categories without exception. 2. Industries reserved for the public sector were reduced to only a part of atomic energy generation and some core activities in railway transport. 3. The market was allowed to determine prices in most industries. Which of the statements given above is/are correct?

The correct option is 2 and 3 only. Explanation The New Industrial Policy (NIP) announced in July 1991 sought to deregulate the Indian industry to promote efficiency and competitiveness. It marked a significant shift from the earlier regime of strict controls, licenses, and permits (License Raj) to a more liberalized and market-driven economy. Statement-wise Analysis - Statement 1 is Incorrect. While the 1991 reforms abolished industrial licensing for most industries, it was not done without exception. Licensing was retained for a specific list of industries related to security, strategic concerns, social reasons, hazardous chemicals, and environmental concerns. Currently, licensing is mandatory for five categories: alcohol, tobacco products, aerospace and defense equipment, industrial explosives, and hazardous chemicals. - Statement 2 is Correct. The number of industries reserved for the public sector was drastically reduced. Initially, the list was pruned from 17 to 8 in 1991. Over subsequent years, this list was further reduced. Currently, the only industries reserved for the public sector are atomic energy and railway operations. - Statement 3 is Correct. A key component of the 1991 reforms was the removal of price controls. The market was allowed to determine prices in most industries to ensure that supply and demand forces could operate efficiently, thereby reducing distortions in the market. Key Takeaway The 1991 Industrial Policy effectively ended the 'License Raj' by abolishing licensing for all but a few strategic and hazardous industries, drastically reducing the public sector reservation list, and allowing market forces to determine prices.

NCERT Class 11 Economics — Chapter 3: Liberalisation, Privatisation and Globalisation: An Appraisal

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Consider the following statements regarding the deregulation of the industrial sector under the 1991 reforms:

Industrial licensing was abolished for all product categories without exception.
Industries reserved for the public sector were reduced to only a part of atomic energy generation and some core activities in railway transport.
The market was allowed to determine prices in most industries.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A2 only
B2 and 3 only
C1 and 2 only
D1, 2 and 3

Did you get this right?

Solution

The correct option is 2 and 3 only.

Explanation

The New Industrial Policy (NIP) announced in July 1991 sought to deregulate the Indian industry to promote efficiency and competitiveness. It marked a significant shift from the earlier regime of strict controls, licenses, and permits (License Raj) to a more liberalized and market-driven economy.

Statement-wise Analysis

Statement 1 is Incorrect. While the 1991 reforms abolished industrial licensing for most industries, it was not done without exception. Licensing was retained for a specific list of industries related to security, strategic concerns, social reasons, hazardous chemicals, and environmental concerns. Currently, licensing is mandatory for five categories: alcohol, tobacco products, aerospace and defense equipment, industrial explosives, and hazardous chemicals.
Statement 2 is Correct. The number of industries reserved for the public sector was drastically reduced. Initially, the list was pruned from 17 to 8 in 1991. Over subsequent years, this list was further reduced. Currently, the only industries reserved for the public sector are atomic energy and railway operations.
Statement 3 is Correct. A key component of the 1991 reforms was the removal of price controls. The market was allowed to determine prices in most industries to ensure that supply and demand forces could operate efficiently, thereby reducing distortions in the market.

Key Takeaway

The 1991 Industrial Policy effectively ended the 'License Raj' by abolishing licensing for all but a few strategic and hazardous industries, drastically reducing the public sector reservation list, and allowing market forces to determine prices.

Your note

More from Chapter 3: Liberalisation, Privatisation and Globalisation: An Appraisal

With reference to the economic crisis of 1991 in India, consider the following statements: 1. The crisis was triggered because the government was unable to make repayments on its borrowings from abroad. 2. Foreign exchange reserves were sufficient for more than a year of imports. 3. The crisis was compounded by rising prices of essential goods. Which of the statements given above is/are correct?

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With reference to the 'Outsourcing' phenomenon under globalisation, consider the following statements: 1. It involves a company hiring regular services from external sources which were previously provided internally. 2. The growth of outsourcing is primarily driven by the stagnation of the manufacturing sector in developed countries. 3. India has become a destination for outsourcing due to low wage rates and the availability of skilled manpower. Which of the statements given above is/are correct?

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With reference to the trade policy reforms initiated in 1991, consider the following statements: 1. Quantitative restrictions on imports of manufactured consumer goods were fully removed immediately in 1991. 2. Export duties were removed to increase the competitive position of Indian goods in international markets. 3. Import licensing was abolished except for hazardous and environmentally sensitive industries. Which of the statements given above is/are correct?

hard

Consider the following statements regarding the performance of the agriculture sector during the reform period: 1. Public investment in the agriculture sector has declined in the reform period. 2. The removal of fertiliser subsidy has decreased the cost of production for farmers. 3. There has been a shift from export market production to domestic market production. Which of the statements given above is/are correct?

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Consider the following statements regarding the industrial sector performance during the reform period: 1. The industrial growth has recorded a slowdown due to cheaper imports replacing the demand for domestic goods. 2. Infrastructure facilities became world-class due to massive investment. 3. Developing countries like India have not gained sufficient access to developed markets. Which of the statements given above is/are correct?

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The correct option is 2 and 3 only.

Explanation

Statement-wise Analysis

Statement 1 is Incorrect. While the 1991 reforms abolished industrial licensing for most industries, it was not done without exception. Licensing was retained for a specific list of industries related to security, strategic concerns, social reasons, hazardous chemicals, and environmental concerns. Currently, licensing is mandatory for five categories: alcohol, tobacco products, aerospace and defense equipment, industrial explosives, and hazardous chemicals.
Statement 2 is Correct. The number of industries reserved for the public sector was drastically reduced. Initially, the list was pruned from 17 to 8 in 1991. Over subsequent years, this list was further reduced. Currently, the only industries reserved for the public sector are atomic energy and railway operations.
Statement 3 is Correct. A key component of the 1991 reforms was the removal of price controls. The market was allowed to determine prices in most industries to ensure that supply and demand forces could operate efficiently, thereby reducing distortions in the market.