Liberalisation means removing or reducing restrictions in economy
The word liberalisation is derived from word 'liberty' which means freedom
Hence, Liberalisation means promoting a free market economy
In Which Sectors were Liberalisation Measures Undetaken
They were taken in almost all sectors and reforms made
Example -
Industrial Sector Reforms
Tax Reforms
Financial Sector Reforms
Foreign Exchange Reforms
Trade and Invesment Policy Reforms





What is Financial Sector?
Financial Sector includes financial instituitions like Commercial Banks, Investment Banks, Stock Exchange
Operations and Foreign Exchange Operations
They are regulated by RBI through various Rules like:
RBI Decides amt of Money other banks can keep
RBI Fixes Rate of Interest
RBI Fixes Nature of Lending (Which sectors should be given loans and which not)
Tax Reforms
There are 2 types of Taxes - Direct Tax and Indirect Tax
NCERT Questions
Q3
Why did RBI have to change its role from controller to facilitator of financial sector in India?
View AnswerRBI changed its role from a controller to a facilitator of financial sector in India from 1991, the reasons were:
Give Banks permission to set up new branches without the approval of RBI
To allow Private Sector Banks to come up
To increase Foreign Investment Limit in Banks
To allow FII (Foreign Instituitional Investors like Merchant Banks, Mutual Funds etc) to invest in Foreign Market
Q4
How is RBI controlling the commercial banks?
View AnswerEARLIER (TILL 1990)
RBI Acted as Regulator of Financial Sector
Consultation of RBI Required in almost all matter
FROM 1991
RBI Acted as Facilitator of Financial Sector
Financial Sector (Banks) were allowed to take decision without consulting RBI
Example
Banks were given permission to set up new branches without the approval of RBI
MCQ Other Books
Q1
In the following questions, select the correct answers:
1 Which of the following refers to relaxation of previous government restrictions?
A Privatisation
B Globalisation
C Disinvestment
D Liberalisation
View AnswerD Liberalisation
Explanation
Liberalisation means removing or reducing restrictions in economy
The word liberalisation is derived from word 'liberty' which means freedom
Hence, Liberalisation means promoting a free market economy
Q2
Which of these economic reforms were initiated by the government under liberalisation?
A Industrial Sector Reforms
B Agricultural reforms
C Financial sector reforms
D All of these
View AnswerA Industrial Sector Reforms
C Financial sector reforms
Explanation
Q3
Features of New EXIM Policy are:
A Abolition of quantitative restriction on export
B Special incentives on exports of agricultural products.
C Improvement in facilities of Special Economic Zones.
D All of the above.
View AnswerD All of the above.
Explanation
EXIM Poicy Reforms meand Export Import Reforms or Trade and Investment Policy Reforms
Features of this Polciy included
1 Abolition of quantitative restriction on export
2 Special incentives on exports of agricultural products.
3 Improvement in facilities of Special Economic Zones.
(Special Economic ones are areas where there government gives tax benefit on exports
Q2
Identify the correctly matched pair of Column A to that of Column B:
Column A | Column B |
1. Items of imports and exports | (a) Import substitution |
2. Outward oriented policy | (b) Composition of foreign trade |
3. Inward oriented policy | (c) Export promotion |
4. Imports exceeds exports | (d) Unfavourable Balance of Trade |
A 1 – (a)
B 2 – (b)
C 3 – (c)
D 4 – (d)
View AnswerD 4 – (d)
Explanation
If imports exceeds exports, it will be an unfavourable Balance of Trade
Q3
To increase foreign trade, we should resort to:
A Reduction in tariff rates.
B Credit facilities to exporters from foreign markets.
C To make available better infrastructural facilities to exporters.
D All of the above.
View AnswerD All of the above.
Explanation
All of these are required to promote Foreign Trade
If Tariff Rates are Reduced,Goods will become cheaper and able to compete with foreign Goods
Credit Facilities (Loan) will help exporters get funds during the period from Date of Order to Date of Payment
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