Maharashtra Board Class 11 Economics Chapter 9 Economic Policy of India Since 1991 Solutions

Complete the Following Statements by Choosing the Correct Alternative:

 

Question 1. After Independence, India had adopted ____________
(a) Socialism
(b) Capitalism
(c) Mixed Economy
(d) None of the options
Answer: (c) Mixed Economy
In simple words: After getting independence, India chose a middle path called a mixed economy, which combines both government-run public sectors and private businesses.

🎯 Exam Tip: Remember that India chose a mixed economic model to balance social welfare (socialism) with private enterprise (capitalism) to achieve rapid economic growth.

 

Question 2. The new economic policy approved foreign technology in ____________
(a) Cottage industries
(b) Small scale industries
(c) Micro enterprises
(d) High priority industries
Answer: (d) High priority industries
In simple words: The government allowed foreign technology to be used in major, high-priority industries to help them modernize and grow faster.

🎯 Exam Tip: Remember that high-priority industries require advanced technology, which is why foreign tech approvals were focused here.

 

Question 3. At present, the number of industries reserved for public sector has been reduced to ____________
(a) 3
(b) 5
(c) 7
(d) 2
Answer: (d) 2
In simple words: Today, only two industries (atomic energy and railway transport) are strictly reserved for the government, while all others are open to private businesses.

🎯 Exam Tip: Memorize the exact number of reserved public sector industries (which is 2) as this is a very common direct question in exams.

 

Assertion and Reasoning Questions

 

Question 1. Assertion (A): Delicensing of industries was an important step taken under liberalization.
Reasoning (R): Unwanted controls and restrictions led to economic stagnation prior to 1991.
(a) (A) is TRUE but (R) is FALSE
(b) (A) is FALSE but (R) is TRUE
(c) (A) and (R) both are TRUE and (R) is the correct explanation of (A)
(d) (A) and (R) both are TRUE but (R) is not the correct explanation of (A)
Answer: (c) (A) and (R) both are TRUE and (R) is the correct explanation of (A)
In simple words: Removing the need for government licenses (delicensing) was a key part of freeing up the economy because the old, strict rules had stopped the country's economic growth before 1991.

🎯 Exam Tip: When solving assertion-reason questions, read both statements independently first to check if they are true, then connect them with 'because' to see if the reason explains the assertion.

 

Question 2. Assertion (A): In 1990-91, India faced an acute shortage of foreign exchange reserves.
Reasoning (R): Import quotas and tariffs led to an increase in imports.
(a) (A) is TRUE but (R) is FALSE
(b) (A) is FALSE but (R) is TRUE
(c) (A) and (R) both are TRUE and (R) is the correct explanation of (A)
(d) (A) and (R) both are TRUE but (R) is not the correct explanation of (A)
Answer: (a) (A) is TRUE but (R) is FALSE
In simple words: India did face a major shortage of foreign money in 1990-91, but import quotas and tariffs actually decrease imports instead of increasing them.

🎯 Exam Tip: Remember that tariffs and quotas are trade barriers designed to restrict imports to protect domestic industries.

 

Question 3. Assertion (A): Post liberalization, the sale of domestic goods has increased.
Reasoning (R): The demand for imported goods had increased due to liberal policy.
(a) (A) is TRUE but (R) is FALSE
(b) (A) is FALSE but (R) is TRUE
(c) (A) and (R) both are TRUE and (R) is the correct explanation of (A)
(d) (A) and (R) both are TRUE but (R) is not the correct explanation of (A)
Answer: (b) (A) is FALSE but (R) is TRUE
In simple words: After liberalization, domestic goods faced intense competition from foreign products, while the demand for imported goods rose significantly due to easier import rules.

🎯 Exam Tip: Pay close attention to historical economic impacts; liberalization opened up markets, which initially challenged domestic sales due to a surge in imports.

 

Question 4. Assertion (A): Due to Globalisation, a country cannot achieve self-sufficiency in food production.
Reasoning (R): Globalisation has created a revolution in the IT sector.
(a) (A) is TRUE but (R) is FALSE
(b) (A) is FALSE but (R) is TRUE
(c) (A) and (R) both are TRUE and (R) is the correct explanation of (A)
(d) (A) and (R) both are TRUE but (R) is not the correct explanation of (A)
Answer: (d) (A) and (R) both are TRUE but (R) is not the correct explanation of (A)
In simple words: Both statements are correct facts, but the growth of the IT sector is not the reason why countries depend on international trade for food.

🎯 Exam Tip: When both statements are true but unrelated, option (d) is always the correct choice because the reason does not explain the assertion.

 

3. Find the Odd Word Out:

Question 1. New Economic Policy – Liberalization, Privatization, Demonetization, Globalisation
Answer: Demonetization. This was not a part of the New Economic Policy of 1991, which focused on opening up the economy.
In simple words: Demonetization is the odd one out because it refers to stripping a currency unit of its status as legal tender, whereas the other three are the core pillars of the 1991 economic reforms.

🎯 Exam Tip: Identify the odd option by remembering the three main pillars of the New Economic Policy: LPG (Liberalization, Privatization, and Globalization).

 

Question 2. Industries requiring compulsory licensing – defense equipment, agro-based industries, cigarettes, industrial explosives
Answer: agro-based industries. These industries do not require compulsory licensing under the current industrial policy, making them easier to establish.
In simple words: Agro-based industries do not need a government license to start, unlike defense, cigarettes, or explosives which are strictly regulated.

🎯 Exam Tip: Memorize the short list of industries that still require compulsory licensing in India to easily spot the odd one out.

 

Question 3. Navratna status companies – SPCL, IOC, ONGC, HPCL
Answer: SPCL. Unlike the other options, SPCL is not a recognized Navratna public sector enterprise in India.
In simple words: IOC, ONGC, and HPCL are major government-owned companies with special status, while SPCL is the odd one out.

🎯 Exam Tip: Keep a list of major Maharatna and Navratna companies handy, as examiners frequently ask questions to distinguish them.

 

Question 4. Liberalization dealt with the following – MRTP, FERA, SEBI, NTPC
Answer: NTPC. NTPC is a public sector power generation company and not a regulatory act or body associated with economic liberalization reforms.
In simple words: MRTP, FERA, and SEBI are regulatory frameworks and bodies modified or created during liberalization, whereas NTPC is simply a power company.

🎯 Exam Tip: Focus on understanding the regulatory reforms of 1991 to easily differentiate between policy acts and public sector undertakings.

 

4. Identify and Explain the Concepts from the Given Illustrations:

 

Question 1. Vehicles manufactured by various automobile companies are now available in India.
Answer: Globalization. Globalization means the interaction of the domestic economy with the rest of the world with regard to foreign investment, trade, production, and financial matters. This integration allows consumers access to global brands locally.
In simple words: Globalization connects our local markets with international companies. This is why we can easily buy cars made by foreign brands right here in India.

🎯 Exam Tip: When explaining economic concepts, always define the term first and then link it directly to the example given in the question.

 

Question 2. Government equity in some public sector enterprises is sold to the private sector.
Answer: Disinvestment. A disinvestment is an act of selling shares of sick public sector units to the private sector. This process helps the government raise capital and reduce its fiscal burden.
In simple words: Disinvestment is when the government sells its ownership shares in public companies to private buyers. It is like selling a part of your property to get cash.

🎯 Exam Tip: Clearly distinguish between privatization (transfer of control) and disinvestment (selling of equity shares) to score full marks.

 

Question 3. Foreign investments are encouraged on a large scale in the industrial sector of India.
Answer: Foreign Direct Investment (FDI). FDI was approved under the Industrial Policy of 1991, to encourage investment in high-priority industries which require high investment and technology. This policy shift aimed to integrate the Indian economy with global markets.
In simple words: Foreign Direct Investment (FDI) allows companies from other countries to invest in Indian industries. This helps bring in better technology and more money for big projects.

🎯 Exam Tip: Mention the year of the Industrial Policy (1991) and the term "Foreign Direct Investment" to secure full marks.

 

5. State with Reasons Whether You Agree or Disagree with the Following Statements:

 

Question 1. Liberalization has permitted the use of foreign technology.
Answer: Yes, I do agree with the statement.

• Liberalization has encouraged foreign technology.
• Foreign technology is allowed in high-priority industries.
• Foreign technology helps to reduce the cost and make the industries competitive.

This technological upgrade has significantly boosted domestic manufacturing capabilities.
In simple words: Yes, liberalization made it easier for Indian companies to use advanced technology from other countries. This helps make products cheaper and better, allowing Indian businesses to compete globally.

🎯 Exam Tip: Always start your answer by clearly stating "Yes, I do agree..." or "No, I disagree..." before listing your supporting reasons.

 

Question 2. The government has given private enterprises free access to the public sector.
Answer: Yes, I do agree with the statement.

• 17 industries were reserved for the public sector under the Industrial Policy of 1956.
• But in NEP – 1991, the number of public sector industries reduced from 17 to 2.
• Railway transport and atomic energy are reserved for the public sector.
• The involvement of the private sector in economic activities has increased after NEP.

This transition allowed private players to enter fields that were previously completely closed to them.
In simple words: Yes, the government opened up many areas to private businesses that were once only run by the government. Now, only railways and atomic energy remain strictly under government control.

🎯 Exam Tip: Remember to mention the specific number of reserved industries (reduced from 17 to 2) and name the remaining reserved sectors (railways and atomic energy).

 

Question 3. Government has a monopoly in the insurance sector.
Answer: No, I do not agree with the statement.
• The insurance sector was a monopoly of the Government till 1991.
• In 1991, IRDA (Insurance Regulatory and Development Authority Act) was introduced.
• The IRDA has given licenses to many private companies to start insurance businesses in India.
• Due to the entry of private companies, the monopoly of government has come to an end. This shift allowed for healthy competition and a wider variety of insurance products for consumers.
In simple words: The government used to be the only one selling insurance in India. In 1991, they allowed private companies to join, which ended the government's single control over this sector.

🎯 Exam Tip: When disagreeing with a statement, state your disagreement clearly in the first line, then list the historical reforms (like IRDA in 1991) that changed the situation.

 

Question 4. The creation of the National Renewal Board (NRB) was done to remove poverty.
Answer: Yes, I do agree with the statement.
• Under the public sector, some units were closed due to loss.
• The workers of these units had to face the problem of unemployment and poverty.
• To solve this problem, the government formed the National Renewal Board (NRB). This safety net ensured that displaced families could sustain themselves during difficult economic transitions.
• NRB provides compensation to retrenched workers which help to reduce poverty in the country.
In simple words: When some government factories closed down, workers lost their jobs and became poor. The government created the National Renewal Board to give these workers money and support to help them get back on their feet.

🎯 Exam Tip: Clearly link the closure of public sector units to worker unemployment, and explain how the NRB's financial compensation directly addresses this poverty.

 

Question 5. Indian Oil Corporation is one of the public sector units among ‘Navratnas’.
Answer: Yes, I do agree with the statement.
• Navratnas are the Public Sector Units (PSUs).
• In 1997-98, Nine PSUs were selected for Navratna status.
• These PSUs were selected on the basis of their performance. Indian Oil Corporation was recognized under this prestigious category due to its consistent profitability and global scale.
• These Navratnas were given full financial and managerial autonomy.
In simple words: The government chose nine top-performing public companies, called 'Navratnas', and gave them more freedom to run their business. Indian Oil Corporation is one of these highly successful companies.

🎯 Exam Tip: Remember to mention the year 1997-98 and the key benefit of 'Navratna' status, which is financial and managerial autonomy.

 

6. Answer in Detail:

 

Question 1. Explain the features of the New Economic Policy of 1991.
Answer: The process of the new economic policy started in 1985 and got momentum in 1991. This policy marked a significant shift towards liberalization and integration with the global economy.

Features of Economic Policy, 1991:
• Delicensing: The new industrial policy abolished all industrial licensing, except 18 specified industries related to security and strategic concerns and social reasons.
• Abolition of MRTP Act: No prior approval of the MRTP commission is now required for setting up industrial units by the large business houses.
• Encouragement to Small Scale Industries (SSI): The investment limit of the SSI has been increased up to 5 crores which will help to upgrade their machinery.
• Encouraging Foreign Investment: Many industrial units were open to foreign investment under the 1991 policy. The limit was raised to 51% and 100% in some industries and 100% in mining, pollution control equipment, electricity generation projects, ports, etc.
• Reducing the role of the Public Sector: The number of industries reserved for the public sector was reduced from 17 to 2, it includes railways and atomic energy.
• Trade Liberalisation: Relaxation is given to importers by abolishing import licensing controls. The permission for external credit and set up of Special Economic Zones (SEZ) to promote export. To promote agricultural export Agro Export Zones (AEZ) were introduced.
• Reforms in Insurance Sectors: The Insurance Regulatory and Development Authority Act (IRDA) has given licenses to many private companies to start insurance businesses which ended the monopoly of government e.g. Max Life, Bajaj, Allianz, Aegon, etc.
• Reforms in Financial Sector: The NEP has allowed private banks and foreign banks to do banking business in the financial sector.
In simple words: The New Economic Policy of 1991 opened up India's economy by reducing government control, encouraging private businesses, and welcoming foreign investments. This helped the country grow faster and connect better with the global market.

🎯 Exam Tip: Memorize at least five key features like Delicensing, Abolition of MRTP, and Trade Liberalisation with their specific details to secure full marks.

 

Question 2. Explain the measures undertaken for Globalisation.
Answer: Globalisation refers to the integration of the national economy with the global economy. The Indian government introduced several reforms to encourage international trade and capital flow.

Measures undertaken for Globalisation:
• Reduction in Tariffs: Import duties and customs tariffs were significantly reduced to encourage international trade and competitiveness.
• Encouragement to Foreign Investment: Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) were promoted, allowing foreign capital into various sectors.
• Convertibility of Rupee: The Indian rupee was made partially convertible on current account to facilitate easy trade transactions and exchange.
• Long-term Trade Policy: Foreign trade policies were liberalized, removing unnecessary restrictions, licensing, and administrative controls on imports and exports.
• Collaboration with Foreign Companies: Indian companies were encouraged to enter into joint ventures and technical collaborations with foreign firms.
In simple words: Globalisation means connecting India's economy with the rest of the world. This was done by lowering import taxes, allowing foreign companies to invest easily, and making international trade much simpler.

🎯 Exam Tip: Clearly define 'Globalisation' before listing the measures, and highlight key terms like 'Rupee Convertibility' and 'Tariff Reduction'.

Question. Explain the concept of globalisation and the measures taken for globalisation.
Answer: Globalization means the interaction of the domestic economy with the rest of the world with regard to foreign investment, trade, production, and financial matters. An additional measure to support this integration was the simplification of administrative procedures for international trade.

Measures were taken for Globalisation:
• Removal of quantitative restrictions: To make the Indian economy attractive to foreign investors, the government has reduced custom duties and tariffs imposed on imports and exports.
• Encouragement to foreign capital: To India, foreign investment has wider scope since 1991. Foreign capital is allowed in India without any restrictions.
• Convertibility of Rupee: It means Indian currency can be converted into the currency of other countries.
• Foreign collaboration: To take the benefit of advanced technology, Indian companies are allowed to enter into foreign collaboration e.g. Maruti-Suzuki, Hero-Honda, etc.
• Long-term trade policy: The trade policy was introduced for a longer duration to promote foreign trade.
• Encouragement to export: Many incentives have been given to industries through EXIM policy. SEZ and AEZ are created to encourage export.
In simple words: Globalisation connects a country's economy with the rest of the world. India did this by reducing trade taxes, allowing foreign investments, and making it easier to trade and convert currency.

🎯 Exam Tip: To score full marks, define globalisation clearly and list at least four key measures like rupee convertibility and foreign collaboration with brief explanations.

 

Question 7. Read the following passage carefully and answer the questions:

The Indian ice cream industry is one of the fastest-growing segments of the dairy and food processing sector. India has a low per capita consumption of ice cream of 400 ml whereas in the USA it is 22,000 ml and in China, it is 3000ml.

The per capita consumption of ice cream is low in India because it is a country filled with traditional sweets of more than 100 varieties. In developed countries, people have either pastries or ice-creams for dessert. In the era of globalization, the mindset of the people is fast changing. This is because multi-national companies have set up a number of ice-cream parlors, with a lot more varieties and flavours that attract the younger lot. Besides this, there are better delivery systems.

The ice-cream sector has great potential for growth in the country due to improvement in the cold chain infrastructure, increasing disposable income, and changing the lifestyle of the people. However, it is taxed higher with 18 percent

GST while other dairy products in the same basket such as butter and cheese are taxed at 12 percent. The ice-cream industry has generated revenue of more than $1.5 billion in 2016-17. With the employment of 15 lakh people directly or indirectly, it is also considered one of the largest employers of the dairy and food processing industry.

 

Question 1. Identify the reason for the low per capita consumption of ice cream in India.
Answer: In India, traditional sweets are available, which are having more than 100 varieties. These local delicacies are deeply rooted in cultural celebrations and daily preferences.
In simple words: Many people in India prefer traditional Indian sweets over ice cream. Since there are so many local sweet options available, ice cream consumption remains low.

🎯 Exam Tip: Highlight the cultural preference for traditional sweets as the primary competitor to ice cream in India.

 

Question 2. Explain the impact of globalisation on the Indian ice-cream industry.
Answer: Due to globalisation, multinational companies have set up a number of ice-cream parlours with a lot of varieties and flavours. It helps to attract the younger generation of today. This shift has also encouraged local brands to upgrade their quality and marketing strategies.
In simple words: Globalisation brought international ice cream brands to India with new flavours and modern parlours. This has made ice cream very popular among young people.

🎯 Exam Tip: Mention the entry of multinational brands and the introduction of diverse flavours to show the direct effect of globalisation.

 

Question 3. Find out the factors that could lead to the growth of the ice-cream industry in India.
Answer: In India Ice-cream industry has wider scope because there is an improvement in cold chain infrastructure, increase in disposable income, and changing lifestyle of the people. Urbanization and easier access to retail outlets also play a major role.
In simple words: Better refrigeration, more spending money, and modern lifestyles are helping the ice cream market grow. People can now buy and store ice cream more easily.

🎯 Exam Tip: List key economic and infrastructural factors like cold storage and disposable income to secure full marks.

 

Question 4. Express your views about the implications of higher GST on the ice-cream industry in India.
Answer: The ice-cream sector is indirectly dependent on the primary sector. If the demand for ice cream increased then the income of cattle owners will grow. 18% GST on ice cream is high because ice cream is made from milk which is good for health as compared to tobacco, pan masala. Same GST (18%) is imposed on tobacco and other harmful products, which seems unfair to a dairy-based food industry.
In simple words: High taxes on ice cream affect dairy farmers because ice cream is made from milk. It is unfair to tax a healthy dairy product at the same high rate as harmful items like tobacco.

🎯 Exam Tip: Explain the link between the dairy industry (primary sector) and ice-cream manufacturing to write a well-rounded answer.

11th Economics Digest Chapter 9 Economic Policy Of India Since 1991 Intext Questions And Answers

 

Question. Find out names of five Private Banks and Foreign Banks. (Textbook Page No. 58)
Answer:
• Private Banks – ICICI Bank, Axis Bank, Kotak Mahindra Bank, Yes Bank, HDFC Bank.
• Foreign Banks – Standard Chartered Bank, DBS Bank, Doha Bank, Bank of America, Royal Bank of Scotland. These financial institutions play a crucial role in providing diverse banking services across India.
In simple words: Private banks are owned by private companies or individuals in India, whereas foreign banks are based in other countries but have branches operating here.

🎯 Exam Tip: Memorize at least three names of each category as they are frequently asked in short-answer questions.

 

Question. Find out names of companies coming under Maharatna and Miniratna status. (Textbook Page No. 60)
Answer:
Maharatna:
• Coal India Ltd.
• Gas Authority of India (GAIL)
• Indian Oil Corporation Ltd (IOCL)
• Mahanagar Telephone Nigam Ltd. (MTNL)

Miniratna:
• Airports Authority of India
• Bharat Earth Movers Ltd.
• Bharat Dynamics Ltd.
• Mazagon Dock Ltd.
• State Trading Corporation of India
These classifications help the government grant financial and operational autonomy to public sector undertakings based on their performance.
In simple words: Maharatna and Miniratna are special titles given by the government to successful public sector companies, giving them more freedom to make business decisions.

🎯 Exam Tip: Clearly distinguish between Maharatna and Miniratna categories by listing them under separate sub-headings to score full marks.

Question. What is Corporate Social Responsibility (CSR)? How does it help society?
Answer:
• CSR means whatever a company does to give back to the community in which it has a presence.
• It is the company’s effort to improve society and the environment in some way. This practice helps build a positive relationship between businesses and the local communities they serve.
• It helps society by providing education, healthcare, disaster relief measures, economic empowerment, planting trees, maintaining parks, etc.
• E.g. Mahindra & Mahindra constructed 4340 toilets in 104 districts of India, especially for girls in Government schools in 2013-14.
In simple words: Corporate Social Responsibility is when companies do good things to help people and the environment. This includes building schools, planting trees, or helping during disasters.

🎯 Exam Tip: When explaining CSR, always include a real-world example like Mahindra & Mahindra to show practical application and secure full marks.

 

Activity-Based Questions

Observe the chart and answer the following questions:

New Economic Policy (NEP) Chart:

• Liberalisation:
  • (a) Interest will determine by banks
  • (b) Abolition of MRTP
  • (c) Industrial expansion
  • (d) Reforms in FERA
  • (e) Reforms in FEMA
  • (f) Investment in infrastructure
• Privatisation:
  • (a) Disinvestment
  • (b) Dereservation
  • (c) BIFR
  • (d) NRB
  • (e) Navratnas
• Globalisation:
  • (a) Encouragement to Foreign Capital
  • (b) Convertibility of Rupee
  • (c) Foreign collaboration
  • (d) Long term trade Policy
  • (e) EXIM, SEZ, AEZ

 

Question 1. What is globalisation?
Answer: Globalisation is a process of integrating the domestic economy with the rest of the world with regard to foreign investment, trade, production, and financial matters. It allows goods, services, and technologies to flow seamlessly across international borders.
In simple words: Globalisation means connecting a country's economy with the rest of the world. This makes it easier for countries to buy, sell, and work together.

🎯 Exam Tip: Remember to mention key pillars like foreign investment, trade, and production to write a complete definition of globalisation.

 

Question 2. Explain the concept of disinvestment.
Answer: Disinvestment is a process of selling shares of sick Public Sector Units (PSUs) to the private sector, so as to increase the production activities of that units and to achieve efficiency in the allocation of resources, improvement in management, etc. This strategy helps reduce the financial burden on the government while encouraging private enterprise. E.g. Disinvestment of Maruti, ITDC hotels, IPCL, VSNL, etc.
In simple words: Disinvestment is when the government sells its ownership in public companies to private businesses. This is done to make those companies run better and save government money.

🎯 Exam Tip: Always define disinvestment clearly as the sale of government shares and provide at least two examples like Maruti or VSNL to score full marks.

 

Question 3. Write the full form of FERA, SEZ, AEZ.
Answer:
• FERA – Foreign Exchange Regulation Act
• SEZ – Special Economic Zones
• AEZ – Agro Export Zones
These abbreviations represent key regulatory frameworks and designated zones established to manage trade and economic growth in India.
In simple words: These are short names for important Indian economic terms: FERA regulates foreign money, SEZ is a special area for business, and AEZ is a special area for farming exports.

🎯 Exam Tip: Memorize these full forms exactly as they are, as they are frequently asked in objective-type questions.

 

Question 4. Why NRB is created?
Answer: National Renewal Board was created to look after the retrenched workers who become unemployed due to the closure of loss-making Public Sector Units (PSUs). Through this Board, the government took the responsibility of providing compensations to the retrenched workers and also to take care of those seeking voluntary retirement. This initiative aimed to protect the interests of labor during periods of industrial restructuring.
In simple words: The National Renewal Board was set up to help workers who lost their jobs when government-owned factories closed down, by giving them money and support.

🎯 Exam Tip: Clearly mention the two main roles of the NRB: providing compensation to laid-off workers and assisting those taking voluntary retirement.

 

Question 5. By what was FERA replaced and why?
Answer: FERA was replaced by FEMA to encourage international trade and to bring flexibility in the laws relating to foreign exchange. This transition marked a shift from strict control to facilitation of foreign trade and payments.
In simple words: FERA was replaced by FEMA to make foreign trade easier and to make the rules about foreign money less strict.

🎯 Exam Tip: Remember that FERA (Regulation) was replaced by FEMA (Management), highlighting the shift from control to management of foreign exchange.