Which one of the following best describes liberalisation ?
Which one of the following best describes liberalisation ?
Options
C: Removal of restrictions on trade — liberalisation frees the economy from government-imposed trade barriers.
Marking Scheme
- 11 mark: for correctly choosing option C (Removal of restrictions on trade).
Hint
Liberalisation literally means to 'liberate' or free the economy from government restrictions — so think 'removal', not 'imposing' restrictions.
Quick Oral Answer
Liberalisation means removing government-imposed restrictions on trade and investment, allowing businesses greater freedom — a key pillar of India's 1991 economic reforms alongside privatisation and globalisation.
Analysis & Explanation
Tests the correct definition of liberalisation as used in India's 1991 economic reforms.
Concept
- Liberalisation = removing government restrictions/barriers on trade and foreign investment to free up markets.
Key points
- Option C is correct: it directly describes removal of trade restrictions, the essence of liberalisation.
- Option A describes protectionism, the opposite policy.
- Options B and D are wrong because liberalisation encourages foreign companies and eases rules on foreign investment, not restricts them.
Common mistakes
- Mixing up liberalisation with protectionism — remember liberalisation means "freeing up," not "tightening control."
Common Mistakes
- 1Confusing liberalisation with protectionism (Option A).
- 2Believing liberalisation means banning or restricting foreign companies rather than welcoming them.
- 3Not connecting the term to India's 1991 economic reforms.
Interesting Facts
India's New Economic Policy of July 1991 was triggered by a severe balance-of-payments crisis, when foreign exchange reserves fell to barely cover a few weeks of essential imports.
Liberalisation dismantled much of India's 'License Raj', under which firms earlier needed government permits to start or expand production.
Liberalisation is one of three linked reforms of 1991 — the other two being privatisation and globalisation.
Spotted a mistake or something unclear?
Tell us — we fix reported answers fast.
Frequently Asked Questions
When was liberalisation introduced in India?
Liberalisation was introduced as part of the New Economic Policy in July 1991, alongside privatisation and globalisation, in response to a severe balance of payments crisis.
What is the difference between liberalisation and globalisation?
Liberalisation is the removal of government restrictions on trade and investment, while globalisation is the broader process of integration between countries through trade, investment, and flow of ideas, made possible partly by liberalisation.