Chapter Exam

Chapter-8 Liberalisation — Online MCQ Test

Q: In which year did India officially launch its liberalisation policy?

Answer: B. 1991 — India initiated economic liberalisation in 1991 under Finance Minister Manmohan Singh during a severe balance of payments crisis.

Q: Which of the following is NOT a feature of liberalisation?

Answer: B. Increased government monopolies — Liberalisation aims to reduce government monopolies, not increase them. It promotes free market competition.

ECONOMICS · Grade 12 · CBSE(NCERT)

Practice Chapter-8 Liberalisation with a free chapter-wise online MCQ test for CBSE(NCERT) Grade 12 ECONOMICS. This chapter covers: Privatisation and Globalisation (LPG). AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter-8 Liberalisation — Important Questions & Answers (FAQ)

Frequently asked questions from CBSE(NCERT) Grade 12 ECONOMICS — Chapter-8 Liberalisation, with answers and explanations. These are sample questions; the exam has its own separate question set.

What does LPG stand for in the context of Indian economic reforms?

A. Liberalisation, Privatisation, and Globalisation ✓
B. Liquified Petroleum Gas and Privatisation
C. Liberalisation, Public Sector, and Growth
D. Liquidity, Price, and Gross Domestic Product

Answer: A. Liberalisation, Privatisation, and Globalisation
LPG is the acronym for the three pillars of India's economic reform strategy introduced in 1991.

In which year did India officially launch its liberalisation policy?

A. 1985
B. 1991 ✓
C. 1995
D. 2000

Answer: B. 1991
India initiated economic liberalisation in 1991 under Finance Minister Manmohan Singh during a severe balance of payments crisis.

What is privatisation?

A. Increase in government control over industries
B. Transfer of ownership of public enterprises to private sector ✓
C. Reduction in foreign direct investment
D. Closure of all government-run factories

Answer: B. Transfer of ownership of public enterprises to private sector
Privatisation involves transferring ownership and management of public sector enterprises to the private sector.

Which of the following is NOT a feature of liberalisation?

A. Removal of trade barriers
B. Increased government monopolies ✓
C. Reduction in licensing requirements
D. Opening of markets to competition

Answer: B. Increased government monopolies
Liberalisation aims to reduce government monopolies, not increase them. It promotes free market competition.

What was the immediate economic crisis that led to India's liberalisation in 1991?

A. High inflation and unemployment
B. Severe balance of payments crisis and depletion of foreign exchange reserves ✓
C. Excessive agricultural production
D. Rapid increase in population

Answer: B. Severe balance of payments crisis and depletion of foreign exchange reserves
India faced a severe balance of payments crisis with depleted foreign exchange reserves, making liberalisation necessary.

Which of the following is an advantage of privatisation?

A. Guaranteed employment for all citizens
B. Improved efficiency and profitability through competition ✓
C. Elimination of all economic problems
D. Increase in government revenue from taxation

Answer: B. Improved efficiency and profitability through competition
Privatisation encourages efficiency as private enterprises operate to maximise profits and reduce costs.

Analyse the statement: 'Liberalisation guarantees economic growth for all sections of society.' Which is true?

A. The statement is completely accurate
B. Liberalisation creates growth but benefits are unevenly distributed; some groups may be disadvantaged ✓
C. Liberalisation has no connection with economic growth
D. Only agricultural workers benefit from liberalisation

Answer: B. Liberalisation creates growth but benefits are unevenly distributed; some groups may be disadvantaged
While liberalisation can promote overall economic growth, the benefits are often unevenly distributed, potentially marginalising certain groups.

Compare the impact of liberalisation on organised and unorganised sectors in India:

A. Both sectors benefited equally
B. Only organised sector benefited while unorganised sector faced challenges ✓
C. Unorganised sector grew faster than organised sector
D. Liberalisation had no differential impact

Answer: B. Only organised sector benefited while unorganised sector faced challenges
The organised sector with better resources adapted to liberalisation, while the unorganised sector struggled with increased competition from larger firms.

Tricky Question: The MRTP Act's relaxation was justified because: which statement is LEAST defensible?

A. Large firms could achieve economies of scale in global competition
B. Monopoly restrictions prevented Indian firms from competing internationally
C. Small firms should be eliminated completely from the economy ✓
D. Larger firms could attract FDI and technology more easily

Answer: C. Small firms should be eliminated completely from the economy
Complete elimination of small firms is unjustifiable. The MRTP relaxation aimed to help Indian firms compete globally, not eliminate small businesses.

Advanced: Consider India's experience: why did the service sector (especially IT) emerge as the primary beneficiary of globalisation while manufacturing struggled?

A. Manufacturing requires no skilled labor
B. Service sector had lower competition from global markets initially and India had cost advantages in skilled IT services ✓
C. Services cannot be exported internationally
D. Government deliberately favoured service sector over manufacturing

Answer: B. Service sector had lower competition from global markets initially and India had cost advantages in skilled IT services
India's IT sector succeeded due to global demand, cost-effectiveness with skilled English-speaking workforce, while manufacturing faced entrenched global competition.

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