Consider the following statements regarding the "Industrial Sector" deregulation: 1. Private sector was not allowed in many industries before 1991. 2. All goods could be produced by any industry before 1991. 3. Controls on price fixation were removed for many industries after 1991. Which of the statements given above is/are correct?

The correct option is 1 and 3 only. Explanation The economic reforms of 1991 marked a paradigm shift in India's industrial policy, moving from a regime of strict regulation, licensing, and state dominance (License-Quota Raj) toward liberalization and market-driven mechanisms. Statement-wise Analysis: - Statement 1 is Correct: Prior to 1991, the Industrial Policy Resolution (IPR) 1956 classified industries into three schedules. Schedule A contained 17 industries (such as arms and ammunition, atomic energy, and railways) that were reserved exclusively for the public sector. The private sector was legally barred from operating in these strategic industries. - Statement 2 is Incorrect: Before 1991, the government implemented a policy of Small Scale Industry (SSI) Reservation. Specific goods were reserved exclusively for production by small-scale units to protect them from competition with large-scale enterprises. Consequently, large industries were prohibited from manufacturing these reserved goods. Furthermore, the system of industrial licensing dictated the production capacity and scope for most industries. - Statement 3 is Correct: As part of the deregulation process post-1991, the government removed administrative controls over pricing and distribution for numerous industries. Market forces were allowed to determine prices for commodities such as steel, cement, and fertilizers, replacing the earlier system of rigid price fixation by the state. Key Takeaway: The 1991 industrial reforms dismantled the "License Raj" by abolishing industrial licensing for most sectors, de-reserving industries previously earmarked for the public sector, and removing state controls on price fixation.

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

mcqmedium

Consider the following statements regarding the "Industrial Sector" deregulation:

Private sector was not allowed in many industries before 1991.
All goods could be produced by any industry before 1991.
Controls on price fixation were removed for many industries after 1991.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1 and 3 only
B1 and 2 only
C2 only
D1, 2 and 3

Did you get this right?

Solution

The correct option is 1 and 3 only.

Explanation

The economic reforms of 1991 marked a paradigm shift in India's industrial policy, moving from a regime of strict regulation, licensing, and state dominance (License-Quota Raj) toward liberalization and market-driven mechanisms.

Statement-wise Analysis:

Statement 1 is Correct: Prior to 1991, the Industrial Policy Resolution (IPR) 1956 classified industries into three schedules. Schedule A contained 17 industries (such as arms and ammunition, atomic energy, and railways) that were reserved exclusively for the public sector. The private sector was legally barred from operating in these strategic industries.
Statement 2 is Incorrect: Before 1991, the government implemented a policy of Small Scale Industry (SSI) Reservation. Specific goods were reserved exclusively for production by small-scale units to protect them from competition with large-scale enterprises. Consequently, large industries were prohibited from manufacturing these reserved goods. Furthermore, the system of industrial licensing dictated the production capacity and scope for most industries.
Statement 3 is Correct: As part of the deregulation process post-1991, the government removed administrative controls over pricing and distribution for numerous industries. Market forces were allowed to determine prices for commodities such as steel, cement, and fertilizers, replacing the earlier system of rigid price fixation by the state.

Key Takeaway:
The 1991 industrial reforms dismantled the "License Raj" by abolishing industrial licensing for most sectors, de-reserving industries previously earmarked for the public sector, and removing state controls on price fixation.

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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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?

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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?

medium

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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The correct option is 1 and 3 only.

Explanation

Statement-wise Analysis:

Statement 1 is Correct: Prior to 1991, the Industrial Policy Resolution (IPR) 1956 classified industries into three schedules. Schedule A contained 17 industries (such as arms and ammunition, atomic energy, and railways) that were reserved exclusively for the public sector. The private sector was legally barred from operating in these strategic industries.
Statement 2 is Incorrect: Before 1991, the government implemented a policy of Small Scale Industry (SSI) Reservation. Specific goods were reserved exclusively for production by small-scale units to protect them from competition with large-scale enterprises. Consequently, large industries were prohibited from manufacturing these reserved goods. Furthermore, the system of industrial licensing dictated the production capacity and scope for most industries.
Statement 3 is Correct: As part of the deregulation process post-1991, the government removed administrative controls over pricing and distribution for numerous industries. Market forces were allowed to determine prices for commodities such as steel, cement, and fertilizers, replacing the earlier system of rigid price fixation by the state.