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Prelims Economy NCERT Questions: Liberalisation, Privatisation and Globalisation Set II

Jan 22, 2016 16:14 IST

    NCERT Books are dispensable for the IAS Preparation. IAS Exam requires the good understanding of the NCERT Books. Economy is one of the most asked subjects on the IAS Prelims Exam. Here we present NCERT Based Questions for the IAS Prelims Exam.

    Q1. Which of the following are correct regarding growth during the reform period?
    1. The growth of agriculture declined.
    2. Theservice sector reported fluctuation.
    3. The growth of industrial sectors has gone up.
    4. The growth during this phase was mainly driven by the growth in the service sector.

    Select the correct answer using the codes given below
    a) 1, 2 and 3 only
    b) 2 and 4 only
    c) 1 and 4 only
    d) 1 and 3 only

    Answer. c)
    Explanation:
    The growth of agriculture declined.The industrial sectors reported fluctuation. The growth of service sector has gone up. The growth during this phase was mainly driven by the growth in the service sector.

    Q2. Consider the below statements:
    1. The foreign investment, which includes foreign direct investment (FDI) and foreign institutional investment (FII), has increased from about US $ 100 million in 1990-91 to US $ 467 billion in 2012-13.
    2. There has been an increase in the foreign exchange reserves from about US $ 6 billion in 1990-91 to about US $ 304 billion in 2013-14.
    3. India is one of the largest foreign exchange reserve holders in the world.

    Select the correct statements using the codes given below:
    a) 1 and 2 only
    b) 2 and 3 only
    c) 1 and 3 only
    d) All are correct

    Answer.  d)
    Explanation:
    Foreign-exchange reserves (also called Forex reserves) are, in a strict sense, only the foreign-currency deposits held by national central banks and monetary authorities.
    However, in popular usage, it also includes gold reserves, special drawing rights (SDRs) and International Monetary Fund (IMF) reserve position because this total figure, which is usually more accurately termed as official reserves or international reserves or official international reserves, is more readily available.

    Q3. Evaluate the below results of the economic reforms process of India:
    1. India is seen as a successful exporter of auto parts, engineering goods, IT software and textiles in the reform period.
    2. The reform process has been widely appreciated for being able to address all of the ‘basic’ problems facing our economy.
    Which of the above statements is/are not correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. b)

    Explanation:
    The reform process has been widely criticised for not being able to address some of the basic problems facing our economy especially in the areas of employment, agriculture, industry, infrastructure development and fiscal management.

    Q4.  Consider the impact of economic reforms on agriculture:
    1. Public investment in agriculture sector has increased only slightly, in the reform period.
    2. The removal of fertiliser subsidy has led to increase in the cost of production, which has severely affected the small and marginal farmers.
    Which of the above statements is/are correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. b)

    Explanation:
    Public investment in agriculture sector especially in infrastructure, which includes irrigation, power, roads, market linkages and research and extension, has fallen in the reform period.

    Q5.  Which of the following are correct with regard to policies in the agriculture sector during the reform period?
    1. This sector has been experiencing a more or less same policy which has adversely affected Indian farmers as they now have to face increased international isolation.  
    2. The focus has mostly been on the production of food grains for the domestic market.
    Which of the above statements is/are correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. d)
    Explanation:
    This sector has been experiencing a number of policy changes such as reduction in import duties on agricultural products, removal of minimum support price on certain product categories and lifting of quantitative restrictions on agricultural products; these have adversely affected Indian farmers as they now have to face increased international competition.  
    Because of export oriented policy strategies in agriculture, there has been a shift from production for the domestic market towards production for the export market focusing on cash crops in lieu of production of food grains. This puts pressure on prices of food grains.

    Q6. Industrial growth in India has recorded a slowdown in the period of economic reforms. What are the reasons for this?
    1. Decreasing demand of domestic industrial products
    2. Globalization
    3. India still does not have the access to developed countries’ markets because of high non-tariff barriers.
    Select the correct statements using the codes given below:
    a) 1 and 2 only
    b) 2 and 3 only
    c) 1 and 3 only
    d) All are correct

    Answer.  d)
    Explanation:
    This is because of decreasing demand of industrial products due to various reasons such as cheaper imports, inadequate investment in infrastructure etc.
    In a globalized world, developing countries are compelled to open up their economies to greater flow of goods and capital from developed countries and rendering their industries vulnerable to imported goods. Cheaper imports have, thus, replaced the demand for domestic goods.
    Third statement is true. For e.g. U.S.A. has not removed their quota restriction on import of textiles from India and China.
    For the aspirants of Civil Services Exam, here we have provided the Chapter-wise NCERT Multiple Choice Questions which will help them to assess their level of preparation:
    1. The central government has missed its disinvestment target almost every year, except in four years, from 2000-01 to 2013-14.   
    2.  The government had a disinvestment target of Rs. 58,425 crore in 2014-15 but could not achieve even 50% of the target.
    Which of the above statements is/are not correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. d)

    Explanation:
    Both are correct. It could achieve only Rs.24,338crore, .i.e. 41.66%. Disinvestment can be defined as the action of an organisation (or government) selling or liquidating an asset or subsidiary. It is also referred to as ‘divestment’ or ‘divestiture.’

    Q8. Which of the following are correct with reference to economic reforms (LPG reforms) and public policies?
    1. Economic reforms have placed limits on the growth of public expenditure especially in social sectors.
    2. The reform policies involving tariff reduction have curtailed the scope for raising revenue through customs duties.
    3. In order to attract foreign investment, tax incentives were provided to foreign investors which further reduced the scope for raising tax revenues.
    Select the correct statements using the codes given below:
    a) 1 and 2 only
    b) 2 and 3 only
    c) 1 and 3 only
    d) All are correct

    Answer.  d)

    Explanation: The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG or Liberalisation, Privatisation and Globalisation model. The primary objective of this model was to make the economy of India the fastest developing economy in the globe with capabilities that help it match up with the biggest economies of the world.

    Q9.  Consider the below statements about WTO:
    1. The WTO was founded in 1995 as the successor organisation to the International Treaty for Trade (ITT).
    2. WTO is expected to establish a modern trading regime in which nations have the right to place suitable restrictions on trade.
    3. In addition, its purpose is also to enlarge production and trade of services, to ensure optimum utilisation of world resources and to protect the environment.
    Select the incorrect statements using the codes given below:
    a) 1 and 2 only
    b) 2 and 3 only
    c) 1 and 3 only
    d) None of the above

    Answer. a)

    Explanation:
    The WTO was founded in 1995 as the successor organisation to the General Agreement on Trade and Tariff (GATT). WTO is expected to establish a rule-based trading regime in which nations cannot place arbitrary restrictions on trade.

    Q10. Which of the following statements reflect the correct picture of reforms?
    1. In the domestic economy, major reforms were undertaken in the industrial and financial sectors.
    2. Major external sector reforms included foreign exchange deregulations and import liberalisation.
    Which of the above statements is/are correct?
    a) 1 only
    b) 2 only
    c) Both 1 and 2
    d) Neither 1 nor 2

    Answer. c)

    Explanation:
    The chain of reforms that took place with regards to business, manufacturing, and financial services industries targeted at lifting the economy of the country to a more proficient level. These economic reforms had influenced the overall economic growth of the country in a significant manner.

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