Question

The removal of barriers on foreign trade and investment by the Indian government has been called as:

• A. Industrialisation
• B. Nationalisation
• C. Privatisation
• D. Liberalisation

Hint:

Sort the four terms by what each is about, ownership, growth of industry, or openness to the outside world. Trade barriers belong to the last group.

Answer 1

The Correct Option is D

Concept:

• A trade barrier is any restriction a government places on imports and exports, such as a tax on imports or a limit on the quantity allowed in.
• Removing such barriers has a specific name in economics, and the question is testing whether that name can be told apart from three similar sounding terms.

Step 1: Name the process.
Removing barriers or restrictions set by the government is what is known as liberalisation. With liberalisation, businesses are allowed to make their own decisions about what to import and export and in what quantity.

Step 2: Recall when India did this.
Starting around 1991, barriers on foreign trade and foreign investment were removed to a large extent. Goods could be imported and exported easily, and foreign companies could set up factories and offices here.
Until then India had kept these barriers to protect producers within the country from foreign competition.

Step 3: Test option (C), privatisation.
Privatisation means transferring ownership of a public sector undertaking to private hands. It concerns who owns a company, not whether goods may cross the border.

Step 4: Test options (A) and (B).
Industrialisation means the growth of industries in a country, and nationalisation is the opposite of privatisation, the taking over of private firms by the government. Neither describes the removal of trade barriers.

Final Answer: (D) Liberalisation