NCERT Class 10 Economics — Chapter 4: Globalisation and the Indian Economy

mcqeasy

In the context of the Indian economy, which major policy shift occurred around the year 1991?

Official previous-year question

Verified 1 Aug 2026.

Options

ABan on MNC operations
BImposition of stricter trade barriers
CLiberalisation of foreign trade and investment
DNationalisation of private industries

Did you get this right?

Solution

Correct Option

The correct option is Liberalisation of foreign trade and investment.

Explanation

The year 1991 marks a watershed moment in the economic history of India. Faced with a severe Balance of Payments (BoP) crisis, the government introduced the New Economic Policy (NEP). This policy marked a paradigm shift from a closed, command-and-control economy to an open, market-oriented economy based on the principles of Liberalisation, Privatisation, and Globalisation (LPG).

Option Analysis

Imposition of stricter trade barriers is Incorrect: The 1991 reforms aimed to integrate the Indian economy with the global economy. Consequently, trade barriers such as high tariffs and quantitative restrictions (quotas) were significantly reduced or removed, rather than made stricter.
Liberalisation of foreign trade and investment is Correct: A central pillar of the 1991 reforms was the liberalisation of foreign trade and investment. This involved abolishing the industrial licensing regime (License Raj), reducing import duties, devaluing the rupee to boost exports, and opening sectors to Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII).
Ban on MNC operations is Incorrect: Prior to 1991, there were restrictions on Multinational Corporations (MNCs) under the FERA act. The reforms replaced FERA with FEMA (Foreign Exchange Management Act) and actively encouraged MNC operations and foreign technology agreements.
Nationalisation of private industries is Incorrect: Nationalisation was a feature of earlier economic phases (e.g., bank nationalisation in 1969). The 1991 policy shifted focus towards privatisation and disinvestment of public sector undertakings (PSUs) to improve efficiency.

Key Takeaway: The 1991 economic reforms dismantled the "License Raj" and transitioned India towards a liberalised economy by promoting free trade, deregulation, and foreign investment.

Your note

More from Chapter 4: Globalisation and the Indian Economy

The term "Containerisation" in the context of globalisation has primarily led to: 1. Huge reduction in port handling costs. 2. Increased time required for the delivery of goods to export markets. 3. Ability to load goods intact onto ships, railways, planes, and trucks. Which of the statements given above is/are correct?

easy

Which international organisation is primarily mandated to establish rules regarding global trade and ensure their compliance?

easy

The rapid improvement in which of the following has been the major factor stimulating the globalisation process?

easy

Which one of the following is NOT a primary factor considered by Multinational Corporations (MNCs) when establishing production units in a country?

easy

In the context of globalisation in India, which one of the following industries has generally remained resilient compared to others where small manufacturers faced stiff competition?

medium

Keep practising Chapter 4: Globalisation and the Indian Economy

Work through every question from this NCERT chapter.

Browse all NCERT Class 10 Economics chapters

Correct Option

The correct option is Liberalisation of foreign trade and investment.

Explanation

Option Analysis

Imposition of stricter trade barriers is Incorrect: The 1991 reforms aimed to integrate the Indian economy with the global economy. Consequently, trade barriers such as high tariffs and quantitative restrictions (quotas) were significantly reduced or removed, rather than made stricter.
Liberalisation of foreign trade and investment is Correct: A central pillar of the 1991 reforms was the liberalisation of foreign trade and investment. This involved abolishing the industrial licensing regime (License Raj), reducing import duties, devaluing the rupee to boost exports, and opening sectors to Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII).
Ban on MNC operations is Incorrect: Prior to 1991, there were restrictions on Multinational Corporations (MNCs) under the FERA act. The reforms replaced FERA with FEMA (Foreign Exchange Management Act) and actively encouraged MNC operations and foreign technology agreements.
Nationalisation of private industries is Incorrect: Nationalisation was a feature of earlier economic phases (e.g., bank nationalisation in 1969). The 1991 policy shifted focus towards privatisation and disinvestment of public sector undertakings (PSUs) to improve efficiency.

Key Takeaway: The 1991 economic reforms dismantled the "License Raj" and transitioned India towards a liberalised economy by promoting free trade, deregulation, and foreign investment.