The economic reforms of 1991 aimed to transform India into which of the following types of economy?

The correct answer is A global and competitive economy.

Key Points

• The economic reforms of 1991 in India were aimed at liberalizing the economy to make it more globally integrated and competitive.
• These reforms included measures such as deregulation, reduction of import tariffs, and opening up to foreign investments.
• The primary focus was on increasing productivity and efficiency through competition and global engagement.
• Key sectors targeted included industrial policy, trade policy, and financial sector reforms.
• The reforms marked a significant shift from a closed, centrally planned economy to a market-driven one.

Additional Information

• Liberalization
  • It refers to the relaxation of government restrictions in areas of social, political, and economic policy.
  • In India, liberalization policies included reducing tariffs and import duties, and dismantling industrial licensing.
• Privatization
  • The transfer of ownership, property, or businesses from the government to the private sector.
  • It was aimed at increasing efficiency and competitiveness in the Indian economy.
• Globalization
  • The process of interaction and integration among people, companies, and governments worldwide.
  • For India, it involved opening up its economy to foreign direct investment and global markets.
• Industrial Policy of 1991
  • Aimed at liberalizing the industrial sector to enhance productivity, efficiency, and competitiveness.
  • It introduced measures to abolish industrial licensing for most sectors.
• Financial Sector Reforms
  • Included deregulation of interest rates, reduction in statutory liquidity ratio (SLR) and cash reserve ratio (CRR), and granting operational autonomy to public sector banks.
  • Aimed at improving the efficiency of financial institutions and markets.