Chapter MCQ Test 2 — Economic Reforms Since 1991
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
India's foreign exchange reserves falling to barely two weeks of imports in 1991 meant the country could not:
Pay for its essential imports
Collect taxes
Hold elections
Grow food
Explanation: With almost no reserves, India risked defaulting on import payments — the heart of the BoP crisis.
Question 2 of 10
Ending the licence raj was meant to raise efficiency by exposing firms to:
Competition and freer entry
More red tape
Higher tariffs
State ownership
Explanation: Removing permits let new firms enter and compete, pressuring all firms to improve.
Question 3 of 10
Outsourcing made India a global hub largely because it offered:
Skilled English-speaking labour at lower cost
No internet
High wages
Closed markets
Explanation: A large pool of skilled, cost-competitive, English-speaking workers attracted IT and back-office work.
Question 4 of 10
Disinvestment serves two goals at once: raising money for the government and:
Improving the efficiency of public enterprises
Closing all firms
Raising tariffs
Ending trade
Explanation: Bringing in private shareholders and discipline can improve PSU performance while funding the budget.
Question 5 of 10
Critics call post-1991 growth 'jobless' because output rose faster than:
Employment
Prices
Exports
Reserves
Explanation: Production and GDP grew strongly, but jobs did not increase in proportion.
Question 6 of 10
As a WTO member, India both gains market access and must:
Negotiate to protect its farmers and small industries
Ban all imports
Leave the GATT
Stop exporting
Explanation: WTO membership opens markets but requires India to bargain hard to safeguard sensitive sectors.
Question 7 of 10
A common criticism is that the reforms relatively neglected ____, which still employs most Indians.
Agriculture
The IT sector
Banking
Telecom
Explanation: Reform energy focused on industry and services, while agriculture — the largest employer — grew slowly.
Question 8 of 10
Tax reforms aimed to encourage compliance and investment mainly by:
Reducing and simplifying tax rates
Raising all taxes
Abolishing taxes
Hiding tax rules
Explanation: Lower, simpler taxes reduce evasion and the burden on enterprise, eventually leading to GST in 2017.
Question 9 of 10
India chose a gradual, partial privatisation (mainly disinvestment) partly out of concern for:
Job losses and selling national assets too cheaply
Too much efficiency
Higher reserves
Lower growth
Explanation: Worries about employment and undervaluing public assets led to caution rather than wholesale sell-offs.
Question 10 of 10
Overall, 1991 marks a turning point because India shifted from a ____ economy to a ____ one.
Closed, slow-growing; open, fast-growing
Open; closed
Rich; poor
Industrial; agricultural
Explanation: The reforms opened the economy to the world and lifted its growth rate dramatically.