NCERT Class 11 Economics — Chapter 2: Indian Economy (1950-1990)

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In the context of the Indian economy (1950-1990), the term 'Permit License Raj' primarily refers to:

Official previous-year question

Verified 1 Aug 2026.

Options

AThe policy of allowing free trade without government intervention.
BThe monopoly of the public sector in agriculture.
CThe dominance of foreign companies in the Indian market.
DThe excessive regulation of the private sector through a system of licenses.

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Solution

Correct Option

The correct option is The excessive regulation of the private sector through a system of licenses.

Explanation

The term "Permit License Raj" refers to the rigid system of government control and regulation over the Indian economy, specifically the industrial sector, between the 1950s and 1990. This framework was institutionalized primarily through the Industries (Development, and subsequent Industrial Policy Resolutions.

Option Analysis

The excessive regulation of the private sector through a system of licenses. is Correct: The defining characteristic of this era was the mandatory requirement for private enterprises to obtain licenses from the government to establish new industrial units, expand existing production capacities, or diversify into new product lines. This system aimed to direct private investment according to central planning priorities but resulted in excessive bureaucratic intervention.
The dominance of foreign companies in the Indian market. is Incorrect: The economic strategy during this period was based on import substitution and self-reliance. Consequently, the entry and operation of foreign companies were severely restricted, and foreign dominance was actively prevented.
The policy of allowing free trade without government intervention. is Incorrect: The License Raj operated within a closed economy framework characterized by high tariffs, quantitative restrictions on imports, and strict state control, which is the antithesis of free trade.
The monopoly of the public sector in agriculture. is Incorrect: While the public sector held a monopoly over strategic heavy industries (the "commanding heights" of the economy), agriculture remained predominantly in the private sector (individual farmers), although it was subject to land reforms and state intervention in pricing.

Key Takeaway: The Permit License Raj was a regulatory regime where the state controlled industrial development through a complex system of licenses and permits, restricting the autonomy of the private sector to ensure alignment with Five-Year Plans.

Your note

More from Chapter 2: Indian Economy (1950-1990)

Consider the following statements regarding 'Modernisation' as a planning goal: 1. It implies the adoption of new technology to increase output. 2. It strictly excludes changes in social outlook. 3. It does not strictly prohibit the use of traditional methods if they are efficient. Which of the statements given above is/are correct?

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What was the primary effect of the 'inward looking trade strategy' on the Indian consumer?

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Which of the following statements about the 'First Five Year Plan' is correct?

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Which of the following was a major loophole in the 'Land Ceiling' legislation? 1. Big landlords voluntarily surrendered their excess land without legal challenge. 2. Landlords registered lands in the names of close relatives to escape the ceiling. 3. The legislation faced hurdles in implementation across many states.

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Which of the following was a negative outcome of the 'Permit License Raj'?

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Correct Option

The correct option is The excessive regulation of the private sector through a system of licenses.

Explanation

Option Analysis

The excessive regulation of the private sector through a system of licenses. is Correct: The defining characteristic of this era was the mandatory requirement for private enterprises to obtain licenses from the government to establish new industrial units, expand existing production capacities, or diversify into new product lines. This system aimed to direct private investment according to central planning priorities but resulted in excessive bureaucratic intervention.
The dominance of foreign companies in the Indian market. is Incorrect: The economic strategy during this period was based on import substitution and self-reliance. Consequently, the entry and operation of foreign companies were severely restricted, and foreign dominance was actively prevented.
The policy of allowing free trade without government intervention. is Incorrect: The License Raj operated within a closed economy framework characterized by high tariffs, quantitative restrictions on imports, and strict state control, which is the antithesis of free trade.
The monopoly of the public sector in agriculture. is Incorrect: While the public sector held a monopoly over strategic heavy industries (the "commanding heights" of the economy), agriculture remained predominantly in the private sector (individual farmers), although it was subject to land reforms and state intervention in pricing.