TERM-1 MCQs LIBERALISATION, PRIVATISATION & GLOBALISATION
TERM-1 MCQS CHAPTER:3 LPG CLASS-12 INDIAN ECONOMIC DEVELOPMENT
1. Consider the statements about the LPG policy 1991
I. India met with an economic crisis in 1991 relating with an economic crisis
II. Government was not able to make repayment on its foreign borrowings
III. Price of essential goods were high
IV. Forex reserves dropped to levels that were not sufficient for even a fortnight
Which of the statements is/are correct?
A. I only
B. II & III only
C. I,II, III & IV
D. III only
Ans. C
2. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 – The continued spending on development programmes of the govt. did not generate additional revenue
Statement 2 – In the late 1980s govt expenditure exceeded the revenue by such that meeting expenditure through borrowings became unsustainable
A. Both the statements are true.
B. Both the statements are false.
C. Statement 1 is true and Statement 2 is false
D. Statement 2 is true and Statement 1 is false
Ans. A
3. Read the following statements – Assertion (A) and Reason (R) & Choose the correct option
Assertion (A) – India’s pre-1990 economic strategy dismantles the vast network of controls and permits that dominated the economic system.
Reason (R) – The 1991 reforms unleashed the energies of Indian entrepreneurs, gave untold choice to consumers and changed the face of the Indian economy.
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true but Reason (R) is false.
D. Assertion (A) is false but Reason (R) is true.
Ans. D
4. Whom did India approached to manage the 1991 crisis?
A. International Bank for Reconstruction & Development
B. International Development Association
C. International Monetary Fund
D. Both A & C
Ans. D
5. India received $_____ Billion as loan to manage the crisis.
A. 8
B. 7
C. 6
D. 9
Ans. B
6. Read the following statements – Assertion (A) and Reason (R) & Choose the correct option
Assertion (A) – India announced the new economic policy
Reason (R) – For availing loan to manage crisis ,the international agents expected India to liberalise & open the economy
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true but Reason (R) is false.
D. Assertion (A) is false but Reason (R) is true
Ans. A
7. Consider these statements:
I. The thrust of NEP was to create more competitive environment in economy & removing barriers to entry of firms
II. NEP can be classified into structural measures & stabilisation measures
III. Structural measures are short term measures to correct weaknesses in BOP & bring inflation under control
IV. Stablilisation measures are long term measures to improve efficiency of economy & increase its international competitiveness
Which of these statements is not true about NEP 1991?
A. I only
B. II only
C. III & IV only
D. IV only
Ans. C
8. _____ was introduced to put an end to the restrictions & open various sectors of the economy.
A. Globalisation
B. Privatisation
C. New Economic Policy
D. Liberalisation
Ans. D
9. Consider the following statements about India’s industrial sector prior to 1991 reforms
I. Under Industrial licensing every entrepreneur had to get permission from the govt to start , close a firm or decide amount of goods that can be produced
II. Liberalisation measures were introduced in 1980s in areas of Industrial licensing , export-import policy ,fiscal policy & foreign investment
III. Some goods could be produced only by SSIs
IV. Controls on price fixation & distribution of some industrial products, private sector not allowed to operate
Choose the incorrect one from the above statements.
A. I & IV
B. II only
C. IV & III only
D. None
Ans. D
10. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 –Industrial licensing was abolished in 1991
Statement 2 – Industrial licensing for alcohol, explosives , hazardous chemicals & drugs, pharma was not abolished
A. Both the statements are true.
B. Both the statements are false.
C. Statement 1 is true and Statement 2 is false
D. Statement 2 is true and Statement 1 is false
Ans. A
11. Which industries are now reserved for public sector?
A. Defence, Transport, Textile
B. Atomic energy, Food processing, Iron & steel
C. Railways, Atomic Energy
D. IT, Aviation, Mineral
Ans. C
Some core activities of Railways & a part of Atomic energy
12. Many goods produced by SSIs have now been _____
A. Reserved
B. Dereserved
C. Restricted
D. Declined
Ans. B
13. Who among the following regulates financial sector in India?
A. President
B. Ministry of Finance
C. RBI
D. Finance Commission
Ans. C
*Financial sector includes- commercial banks, stock exchange operations & forex market
14. Which sector reforms reduced the role of RBI from regulator to facilitator?
A. Financial Sector
B. Industrial Sector
C. Agricultural Sector
D. None
Ans. A
*Financial sector may be allowed to take decisions on many matters without consulting RBI
15. Identify the correct statement from the following:
(Choose the correct alternative)
I. Reform policies led to the establishment of private sector banks
II. Foreign investment limit in banks was raised to 74%
III. Certain managerial aspects were retained by RBI to safeguard the interests of people & the nation
IV. Foreign Institutional Investors are now allowed to invest in India’s financial markets
A. I & II
B. III & IV
C. I only
D. All of these
Ans. D
FII- merchant bankers, mutual funds, pension funds etc.
16.Tax reforms are concerned with government’s –
A. Fiscal policy
B. Revenue policy
C. Monetary policy
D. B & C both
Ans. A
17. Consider the statements about taxes & identify the incorrect statement
I. The rate of corporation tax which was very high , has been gradually reduced
II. Reforms in Indirect taxes to facilitate the establishment of a common national market for goods & commodities
III. GST passed in 2016,came into effect from July 2018 to create ‘one nation , one tax & one market’
IV. GST is expected to generate additional revenue for govt. & reduce tax evasion
A. I only
B. II only
C. III & IV only
D. III only
Ans. D
*GST came into effect from July 2017’; also encourage better compliance in the part of taxpayers by simplifying the procedure
18. Read the following statements – Assertion (A) and Reason (R) & Choose the correct option
Assertion (A) – There has been a continuous reduction in taxes on individual incomes
Reason (R) – High rates of income tax were an important reason for tax evasion
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true but Reason (R) is false.
D. Assertion (A) is false but Reason (R) is true
Ans. A
19. Read the statements & choose the correct option:
I. Liberalisation of trade & investment was initiated to decrease international competitiveness
II. Aim was to promote efficiency of local industries & adoption of modern technology
III. Quantitative restrictions on imports & high tariffs led to rapid growth of manufacturing sector
IV. Trade policy reforms aimed at dismantling quantitative restrictions on imports & exports; reduction of tariff rates ; removal of licensing for imports
A. I & II only
B. III only
C. IV only
D. II & IV only
Ans. D
20. Which of the following is true about liberalization?
I. Export duties have been removed to increase competitive position of Indian goods in international market
II. Import licensing abolished except for hazardous & environmentally sensitive industries
III. Quantitative restrictions on import of consumer goods & agricultural products also removed in 2001
IV. Liberalisation means shedding of ownership & management of govt. owned enterprise
Ans. I , II & III
* Privatisation means shedding of ownership & management of govt. owned enterprise
21. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 –Govt companies are made private by withdrawl of govt. from ownership & management
Statement 2 – Govt. companies are converted into private by buying of public sector companies
A. Both the statements are true.
B. Both the statements are false.
C. Statement 1 is true and Statement 2 is false
D. Statement 2 is true and Statement 1 is false
Ans: C
*Govt. companies are converted into private by sale of public sector companies
22. Consider these statements:
I. Privatisation of public sector enterprises by selling off part of equity of PSEs to the public is known as investment
II. Purpose of sale is to improve financial discipline & facilitate modernization
III. Govt. envisaged that privatization could provide strong impetus to the inflow of FDI
IV. Attempts have been made to improve efficiency of PSUs by giving them autonomy
Which of these statements is/are correct?
A. Only I
B. I,II only
C. III only
D. II,III & IV only
Ans: D
23. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 – Some PSUs have been granted special status as maharatnas, navratnas & miniratnas
Statement 2 – Indian Oil Corporation Ltd. is one of the navratnas
A. Both the statements are true.
B. Both the statements are false.
C. Statement 1 is true and Statement 2 is false
D. Statement 2 is true and Statement 1 is false
Ans. C
*Maharatnas- IOCL, Steel Authority of India Ltd.
*Navratnas- Hindustan Aeronautics Ltd. ; Mahanagar Telecom Nigam Ltd.
*Miniratnas- BSNL; Airport Authority of India; Indian railways catering & tourism corporation Ltd.
24. The integration of the country’s economy with the world’s economy and turning the world into one whole or creating a borderless border is known as-
A. Liberalisation
B. Globalisation
C. Privatisation
D. One world policy
Ans: B
25. __________ is one of the important outcomes of the globalization process.
A. Technology hubs
B. Insourcing
C. Outsourcing
D. Digital World
Ans: C
*Company hires regular services in computer service, legal advice from external sources, from other countries
26. Read the following statements – Assertion (A) and Reason (R) & Choose the correct option
Assertion (A) – MNCs are outsourcing their services to India
Reason (R) –Low wage rates & skilled manpower in India have made it a destination for global outsourcing
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true but Reason (R) is false.
D. Assertion (A) is false but Reason (R) is true
Ans: A
Outsourcing services in India can be availed at a cheaper cost with reasonable skill
27. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 – ONGC Videsh, subsidiary of ONGC engaged in exploration of oil & gas has project in 16 countries
Statement 2 –Tata Steel is one of the top ten global steel companies with its operation in 26 countries
A. Both the statements are true.
B. Both the statements are false.
C. Statement 1 is true and Statement 2 is false
D. Statement 2 is true and Statement 1 is false
Ans: A
28. Consider these statements & choose the correct statement.
I. General Agreement on Trade & Tariff (GATT) was established in 1948 to administer multilateral trade agreements
II. WTO founded in 1995 & replaced GATT to make rules in which nations cannot place restrictions on trade
III. Purpose of WTO is to enlarge production & trade of services to ensure optimum utilization of resources
IV. WTO agreements cover trade bilateral or multilateral through removal of tariff & non-tariff barriers
A. I & II
B. I,II,III & IV
C. III & IV
D. II only
Ans: B
29. Which sector has assumed the highest growth in GDP?
A. Agriculture
B. Manufacturing
C. Services
D. Quaternary
Ans: C
30. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 – Major volume of international trade occurs among the developing nations
Statement 2 – Developing countries are forced to open their markets for developed countries but not allowed access to markets of developed countries
A. Both the statements are true.
B. Both the statements are false.
C. Statement 1 is true and Statement 2 is false
D. Statement 2 is true and Statement 1 is false
Ans: D
*Also, developed countries file complaints over agricultural subsidies in developing countries
31. Which industry is seen as a major contributor to India’s exports?
A. IT
B. Automobiles
C. Iron & Steel
D. Petroleum
Ans: A
32. _____was the Indian Finance Minister in 1991, acknowledged for his capabilities to steer away the economic crisis looming large on the erstwhile Indian Economy.
A. Dr. Subramanian Swamy
B. Pranab Mukherjee
C. Dr. Urjit Patel
D. Dr. Manmohan Singh
Ans: D
33. In – sale minimum 51% of stake of PSE is sold to private sector
A. Strategic
B. Minority
C. Standard
D. None
Ans: A
*Strategic sale involves sale of minimum 51 % of PSE stake to private sector, minority sale involves sale of less than 49% of PSE stake to private sector
34. Which of these reforms are included in the policy of liberalization?
A. Industrial sector reforms
B. Financial sector reforms
C. Tax reforms
D. All of the above
Ans: D
35. In forex reforms rupee was devalued to –
A. Increase in export prices
B. Increase in import prices
C. Decrease in export prices
D. Both B & C
Ans: D
36. In forex reforms rupee was devalued to –
A. Increase in export prices
B. Increase in import prices
C. Decrease in export prices
D. Both B & C
Ans: D
Devaluation means decreasing value of domestic currency which increases import prices leading to fall in imports & rise in exports . Hence, D is the correct option
37. Identify the incorrect statement.
A. During the reform period agricultural sector saw rapid growth
B. Industrial sector has reported fluctuation
C. GDP growth is mainly driven by service sector
D. India is one of the largest foreign exchange reserve holders in the world
Ans: A
*During the reform period agricultural sector’s growth has declined
38. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 – Foreign investment includes foreign direct investment (FDI); foreign institutional investment(FII)
Statement 2 – Foreign investment in India has increased from $100 million in 1990-91 to $30 Billion in 2017-18
A. Both the statements are false.
B. Both the statements are true.
C. Statement 1 is true and Statement 2 is false
D. Statement 2 is true and Statement 1 is false
Ans: B
*Increase in forex reserves from $6 Billion in 1990-91 to $413 Billion in 2018-19
39. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 – Reform led growth has generated sufficient employment in the country
Statement 2 – Reforms in agriculture has benefitted it a lot
A. Both the statements are true.
B. Both the statements are false.
C. Statement 1 is true and Statement 2 is false
D. Statement 2 is true and Statement 1 is false
Ans: B
*Growth rate in agriculture has been decelerating
40. Consider these statements:
I. Since 1991 public investment in agriculture has risen
II. Partial removal of fertilizer subsidy has led to increase in the cost of production and affected farmers
III. Lifting of quantitative restrictions , reduction in import subsidy has affected the farmers
IV. Because of export oriented policy there has been shift from production for the export market focusing cash crops than food crops
Which of these statements is/are correct?
Ans: II,III,IV
41. Read the following statements – Assertion (A) and Reason (R) & Choose the correct option
Assertion (A) – Industrial growth has also recorded a slowdown
Reason (R) – Decreasing demand of industrial products due to cheaper imports & inadequate infrastructure facilities
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true but Reason (R) is false.
D. Assertion (A) is false but Reason (R) is true
Ans: A
42. Read the following statements – Assertion (A) and Reason (R) & Choose the correct option
Assertion (A) – Domestic manufacturers are facing competition from imports
Reason (R) – Expensive imports have increased demand for domestic goods
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C. Assertion (A) is true but Reason (R) is false.
D. Assertion (A) is false but Reason (R) is true
Ans: C
*Cheap imports have replaced demand for domestic goods
43. ______creates conditions for free movement of goods & services from foreign countries that adversely affect local industries & employment in developing countries
A. Liberalisation
B. Globalisation
C. Privatisation
D. Disinvestment
Ans: B
44. Read the following statements – Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Every year government fixes a target for disinvestment of Public Sector Enterprises (PSEs).
Reason (R): Disinvestment is an excellent tool for discarding the loss incurring Public Sector Enterprises (PSEs).
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
c. Assertion (A) is true but Reason (R) is false.
d. Assertion (A) is false but Reason (R) is true.
Ans: B
45. Identify the correct statement.
A. Economic reforms have placed limits on the growth of public expenditure , especially in social sectors
B. Tax reduction in the reform period have not resulted in increase in tax revenue for the govt.
C. Tariff reduction has reduced revenue from custom duties
D. All of the above
Ans: D
46. Sircilla tragedy is related to which of these states?
A. Andhra Pradesh
B. Karnataka
C. Uttar Pradesh
D. Madhya Pradesh
Ans: A
47. Who said that GDP is not necessarily a measure of the progress of a society?
A. APJ Abdul Kalam
B. Manmohan Singh
C. P.V Narsimha Rao
D. K.R. Narayanan
Ans: D
48. Read the following statements carefully and choose the correct alternative from the following:
Statement 1 – The first important reform in the external sector was made in the forex market
Statement 2 – INR was devalued against foreign currencies
A. Both the statements are true.
B. Both the statements are false.
C. Statement 1 is true and Statement 2 is false
D. Statement 2 is true and Statement 1 is false
Ans. A
*An immediate measure to resolve the BOP crisis, led to increase in inflow of forex
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