Structural Changes in the Indian Economy after Liberalization

Process that reduces participation of the state in economic activities

Step 1: Privatisation is one of the three pillars of the LPG model. Step 2: It refers to any process that reduces the role of the state (government/public sector) in economic activities. Step 3: It implies a greater role for private capital and enterprises. Step 4: Option A describes the opposite — nationalisation, not privatisation. Option C describes closing foreign companies, which is protectionism. Option D refers to trade policy, not privatisation.

Selling off part of the equity of Public Sector Undertakings to the private sector

Step 1: PSUs (Public Sector Undertakings) are companies owned by the government. Step 2: Disinvestment means the government sells a part of its ownership (equity/shares) in these PSUs to private buyers. Step 3: This was done to raise money to reduce fiscal deficit and modernise PSUs. Step 4: Option A is the opposite — it describes more investment, not disinvestment. Options C and D are unrelated to disinvestment.

1995

Step 1: The World Trade Organisation (WTO) is an international body that promotes trade among member countries. Step 2: It was set up in 1995. Step 3: India became a founder member of WTO on January 1, 1995. Step 4: Its headquarters is in Geneva, Switzerland. Step 5: The year 1991 is when India's economic reforms began — not when WTO was formed. 1999 is when FEMA was introduced, and 2001 has no specific WTO significance.

Foreign Exchange Management Act (FEMA), 1999

Step 1: FERA (Foreign Exchange Regulation Act) of 1973 was a strict act that tightly controlled foreign exchange transactions. Step 2: As part of liberalisation of the external sector, the government needed a more flexible law for foreign exchange. Step 3: FERA was replaced by FEMA (Foreign Exchange Management Act) in 1999, which is a more liberal act. Step 4: GST Act relates to indirect taxation, MSME Act relates to small enterprises — neither is related to foreign exchange regulation.