Unit 12: Economic Reforms - Practice Quiz

1 In which year did India launch its major economic reforms, often referred to as the New Economic Policy?

2 The economic reforms of 1991 are commonly summarised by the acronym LPG. What does LPG stand for?

3 Which of the following best describes liberalisation in the context of economic reforms?

4 The dismantling of the industrial licensing system in India is popularly known by which term?

5 What does globalisation primarily refer to in economic reforms?

6 Which crisis is widely regarded as the immediate trigger for India's 1991 economic reforms?

7 Which institution is the central bank of India that regulates the financial sector?

8 Which body regulates the securities and stock markets in India as part of financial sector reforms?

9 Financial sector reforms allowed the entry of which type of banks to increase competition?

10 The minimum percentage of deposits that banks must maintain with the RBI as cash reserves is known as which ratio?

11 A key objective of financial sector reforms was to reduce which type of loans that were not being repaid?

12 Which technological shift dramatically increased Indian foodgrain production and is linked to agricultural progress?

13 The price at which the government purchases crops from farmers to protect them is called the:

14 Which of the following is a major reform-related goal for the agriculture sector?

15 Financial support given to farmers to reduce the cost of inputs like fertilisers is called a:

16 The policy of selling government-owned enterprises to private ownership is known as:

17 The sale of a part of the government's shareholding in a public sector unit is referred to as:

18 Industrial reforms after 1991 reduced the requirement of obtaining a licence to start a business. This process involved abolishing industrial licensing for most industries, opening several sectors previously reserved for the public sector to private players, and easing rules on foreign investment. What is this broad reform best described as?

19 Which type of investment where foreign companies invest directly in Indian businesses is abbreviated as FDI?

20 Which service sector activity became a major driver of India's economic growth after the reforms, especially due to software and BPO exports?

21 India launched its major economic reforms in 1991 primarily as a response to which immediate trigger?

22 The 1991 reforms are often summarised as the LPG model. What does LPG stand for?

23 Abolishing the industrial licensing system (except for a few industries) under the 1991 reforms is best described as an example of which policy?

24 The Narasimham Committee (1991) was primarily set up to recommend reforms for which sector?

25 If the RBI reduces the Statutory Liquidity Ratio (SLR), what is the most likely direct effect on commercial banks?

26 The introduction of prudential norms such as capital adequacy and income recognition after 1991 was aimed mainly at achieving what?

27 The establishment of SEBI as a statutory body in 1992 improved financial sector performance chiefly by:

28 Allowing banks to determine most of their lending and deposit interest rates rather than the RBI fixing them is known as:

29 Reducing subsidies on fertilisers and power as part of reforms is expected to have which likely effect on farmers in the short run?

30 Which reform in the agricultural sector aims to let farmers sell produce outside regulated APMC mandis to a wider set of buyers?

31 A frequent criticism is that post-1991 reforms neglected public investment in agriculture. What is the most likely consequence of this neglect?

32 Contract farming, promoted under reforms, primarily benefits farmers by:

33 Before 1991, industrial licensing under the Industries (Development and Regulation) Act mainly resulted in:

34 The 1991 industrial policy reduced the number of industries reserved exclusively for the public sector to a small list. This reflects which aspect of reform?

35 Disinvestment of public sector undertakings refers to:

36 Lowering import tariffs on industrial goods after 1991 was expected to pressure domestic firms to:

37 Since the 1990s reforms, the services sector in India has been notable for:

38 The rapid growth of India's IT and software services exports after reforms was supported mainly by:

39 Reforms in the telecom sector, including allowing private operators, most directly led to:

40 A concern about India's services-led growth after reforms is that it:

41 The Indian economic reforms of 1991 are often described as a shift from a 'command-and-control' regime. Which combination of immediate triggers most directly precipitated the reforms rather than being merely underlying structural weaknesses?

42 The reform framework is commonly summarized as 'LPG' — Liberalisation, Privatisation, and Globalisation. Which statement best distinguishes 'stabilisation' measures from 'structural adjustment' measures within this framework?

43 The Narasimham Committee (1991) recommended reducing the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR). What is the primary intended economic consequence of lowering these ratios for banks?

44 Prudential norms introduced post-1991 required banks to classify assets and provision against Non-Performing Assets (NPAs). Why did the introduction of income recognition norms initially cause reported bank profits to fall?

45 The Capital to Risk-weighted Assets Ratio (CRAR) under Basel norms was adopted in Indian banking reforms. If a bank has capital of crore and risk-weighted assets of crore, does it meet a CRAR requirement?

46 Interest rate deregulation was a key financial-sector reform. Which of the following best explains why full deregulation of deposit and lending rates can improve allocative efficiency yet raise systemic risk?

47 SEBI was granted statutory powers in 1992 as part of capital market reforms. Which reform most directly addressed the problem of information asymmetry between issuers and investors in the primary market?

48 Despite broad liberalisation, agriculture reforms lagged behind industry. Which structural feature best explains why removing subsidies in agriculture proved politically and economically harder than in industry?

49 Minimum Support Prices (MSP) and open market liberalisation can pull in opposite directions. What is the core economic tension when MSP is set well above the equilibrium market price for a crop?

50 Post-reform, agricultural growth remained volatile. Which explanation best accounts for the persistence of low private investment in agriculture despite liberalisation?

51 Trade liberalisation exposed Indian agriculture to global price fluctuations. Which outcome represents an 'edge case' where reducing import tariffs on an agricultural commodity could hurt domestic producers most severely?

52 The 1991 industrial policy abolished industrial licensing for most industries. Which statement best captures why de-licensing was expected to improve productive efficiency?

53 The list of industries reserved exclusively for the public sector was drastically shortened in 1991. What was the deeper economic rationale beyond mere ideology?

54 The MRTP Act was amended to remove the requirement of prior approval for expansion of large firms. Why did this shift the regulatory focus from 'size' to 'conduct'?

55 Disinvestment of public-sector undertakings is a privatisation tool. Which scenario represents a case where disinvestment can improve efficiency yet raise valid distributional concerns?

56 Tariff reductions and removal of quantitative restrictions exposed domestic industry to import competition. Which concept best explains why some 'infant industries' argued for continued protection post-1991?

57 The services sector became the fastest-growing part of India's economy after reforms. Which reform-linked factor most directly enabled the rapid expansion of IT and IT-enabled services?

58 India's growth is often called 'services-led' rather than following the classic manufacturing-led path. What is the key structural anomaly this creates for employment?

59 FDI liberalisation in services like insurance and banking was gradual and capped. Which reasoning best explains the phased, cautious approach to opening the financial-services segment?

60 Consider a reform that fully deregulates a service utility (e.g., electricity distribution) without establishing an independent regulator first. Which outcome is the most likely edge-case failure?