26 extra multiple-choice questions for Liberalization, Privatization and Globalization (12th Standard Commerce, Samacheer Kalvi), beyond the ones printed in the textbook — each with the correct option highlighted and a clear, worked explanation. Free to read in English and Tamil.
Q1
Which one of the following is NOT one of the three dimensions of the New Economic Policy?
- A. Liberalisation
- B. Privatisation
- C. Globalisation
- D. NationalisationCorrect
Explanation. Section 20.01 names three dimensions of the New Economic Policy: liberalisation, privatisation and globalisation, together called the LPG model. Nationalisation is not one of them.
Q2
The base for the New Economic Policy adopted in various countries of the world is the
- A. Dunkel DraftCorrect
- B. Memorandum of Understanding
- C. TRIPS agreement
- D. Industrial Policy of 1956
Explanation. The lesson says the base for New Economic Policy in various countries is the Dunkel Draft, which was about the General Agreement on Trade and Tariff; India committed itself to the policy in 1991.
Q3
Mr. Arthur Dunkel submitted a 22,000 page document to which organisation?
- A. International Monetary Fund
- B. World Bank
- C. World Trade OrganisationCorrect
- D. Reserve Bank of India
Explanation. Arthur Dunkel (1932-2005) submitted a 22,000 page document for the World Trade Organisation (WTO), and many nations then adopted their own New Economic Policies on that basis.
Q4
Before liberalisation, how many industries were kept outside liberalisation and still needed a licence?
- A. Five
- B. SixCorrect
- C. Eight
- D. Seventeen
Explanation. After liberalisation all industries except six were freed from licensing: drugs and pharmaceuticals, hazardous chemicals, explosives, tobacco products, alcoholic drinks, and electronic, aerospace and defence equipment.
Q5
Out of the six non-liberalised industries, which one has since been liberalised, leaving only five under compulsory licensing?
- A. Explosives
- B. Tobacco products
- C. Drugs and pharmaceuticalsCorrect
- D. Hazardous chemicals
Explanation. The lesson notes that currently only five industries are under compulsory licensing, because the drugs and pharmaceuticals industry has been liberalised. Explosives, tobacco products and hazardous chemicals still need a licence.
Q6
Under liberalisation, the investment limit of small scale industries was raised to
- A. Rs. 10 lakh
- B. Rs. 50 lakh
- C. Rs. 1 croreCorrect
- D. Rs. 5 crore
Explanation. Among the forms of liberalisation, the investment limit of small scale industries was raised to Rs. 1 crore so that these units could upgrade their machinery and improve their efficiency.
Q7
In 1991, as an immediate measure to resolve the balance of payments crisis, the Government of India
- A. devalued the rupee against foreign currenciesCorrect
- B. raised the value of the rupee against foreign currencies
- C. stopped all imports into the country
- D. nationalised all foreign companies
Explanation. Under foreign exchange reforms, the first important reform in the external sector was the devaluation of the rupee against foreign currencies in 1991, which increased the inflow of foreign exchange.
Q8
Consider the following:
1. Increase in foreign investment
2. Reduction in external borrowings
3. Increase in unemployment
Which of the above are advantages of liberalisation?
- A. 1 and 2 onlyCorrect
- B. 2 and 3 only
- C. 1 and 3 only
- D. 1, 2 and 3
Explanation. Increase in foreign investment and reduction in external borrowings are listed as advantages of liberalisation. Increase in unemployment, caused by some industries closing, is listed among its disadvantages.
Q9
Assertion (A): Trade liberalisation may cause unbalanced development.
Reason (R): Trade liberalisation often benefits developed countries rather than developing economies which cannot compete against free trade.
- A. Both A and R are true and R is the correct explanation of ACorrect
- B. Both A and R are true but R is not the correct explanation of A
- C. A is true but R is false
- D. A is false but R is true
Explanation. The lesson lists unbalanced development as a disadvantage because trade liberalisation can damage developing economies that cannot compete against free trade and benefits developed countries more. So R explains A.
Q10
After liberalisation, the Indian economy contributed $1.3 trillion to world GDP and became the ______ largest among the world's leading economies.
- A. third
- B. fifth
- C. seventhCorrect
- D. tenth
Explanation. Under the impact of liberalisation, the lesson says India contributed $1.3 trillion to the world GDP and the Indian economy became the seventh largest among the world's leading economies.
Q11
What was the main reason for privatisation of Public Sector Units in India?
- A. PSUs were running in losses due to mismanagement and political interferenceCorrect
- B. PSUs were earning too much profit
- C. Foreign companies refused to invest in PSUs
- D. PSUs had too few workers
Explanation. The lesson states that PSUs were running in losses due to mismanagement and political interference; managers could not work independently and capacity stayed under-utilised, so privatisation became inevitable.
Q12
Which was the first ever company privatised in India?
- A. Bharat Aluminium Co. Ltd (BALCO)
- B. India Scooters LimitedCorrect
- C. Maruti Udyog Ltd (MUL)
- D. Hindustan Zinc Ltd (HZL)
Explanation. A box in section 20.05 notes that India Scooters Limited was the first ever company privatised in India. BALCO, HZL and MUL are listed among public sector enterprises privatised more recently.
Q13
Under privatisation, the number of industries reserved for the public sector was reduced from ______ (as per the 1956 policy) to ______.
- A. 17 to 8Correct
- B. 17 to 3
- C. 8 to 3
- D. 6 to 5
Explanation. Under contraction of public sectors, the industries reserved for the public sector were cut from 17 under the 1956 policy to only 8. Today only atomic energy, defence and railways remain Government monopolies.
Q14
At present, which industries remain Government monopoly industries, that is, public sector industries, in India?
- A. Atomic Energy, Defence and RailwaysCorrect
- B. Coal, Lignite and Railways
- C. Atomic Energy, Mining of ores and Defence
- D. Mineral oils, Defence and Railways
Explanation. A box in the forms of privatisation says that currently only Atomic Energy, Defence and Railways are Government monopoly industries, that is, public sector industries in the country.
Q15
The Memorandum of Understanding (MoU) system was introduced in 1991 mainly to
- A. raise the productivity and performance of PSUsCorrect
- B. sell all PSUs to foreign companies
- C. fix the maximum production capacity of industries
- D. abolish the public sector completely
Explanation. The MoU system was introduced in 1991 to raise the productivity and performance of PSUs. It strengthens the relationship between PSUs and administrative departments and is used to judge their performance.
Q16
Match the forms of privatisation with their meaning:
(A) Disinvestment - 1. Industries reserved for public sector cut from 17 to 8
(B) Memorandum of Understanding - 2. Selling loss-making PSUs to the private sector
(C) Contraction of public sectors - 3. Shares of PSUs sold to the public and financial institutions
(D) Sale of shares of public sectors - 4. Raising productivity and performance of PSUs
- A. A-2, B-4, C-1, D-3Correct
- B. A-3, B-4, C-1, D-2
- C. A-2, B-1, C-4, D-3
- D. A-4, B-2, C-3, D-1
Explanation. Disinvestment means selling loss-making PSUs to the private sector; MoU aims to raise PSU performance; contraction cut reserved industries from 17 to 8; and PSU shares were sold to the public and financial institutions.
Q17
Through the sale of shares of PSUs, the share of the private sector increased from ______ in the year 2011 and after.
- A. 45% to 55%Correct
- B. 25% to 45%
- C. 55% to 75%
- D. 17% to 8%
Explanation. Under sale of shares of public sectors, the Government sold PSU shares to the public and financial institutions, and the share of the private sector increased from 45% to 55% in the year 2011 and after.
Q18
Which one of the following is NOT a disadvantage of privatisation?
- A. Lack of welfare
- B. Political pressure
- C. Ignores the weaker sections
- D. Professional managementCorrect
Explanation. Professional management is listed as an advantage of privatisation, since private owners take bold decisions. Lack of welfare, political pressure and ignoring the weaker sections are its disadvantages.
Q19
Under the foreign trade policy of globalisation, India signed the TRIPS agreement. TRIPS stands for
- A. Trade Related Intellectual Property RightsCorrect
- B. Trade Related Investment Policy System
- C. Tariff Regulation in Public Sector
- D. Trade Restrictions in Private Sector
Explanation. Under foreign trade policy, a form of globalisation, India signed several agreements to expand its trade worldwide, including TRIPS, which stands for Trade Related Intellectual Property Rights.
Q20
In the context of globalisation, 'repatriate' means
- A. to send or bring money back to one's own countryCorrect
- B. to sell public sector shares to private buyers
- C. to remove the licence system
- D. to reduce customs duties on imports
Explanation. Under freedom to repatriate, the lesson explains that repatriate means to send or bring money back to one's own country; globalisation has integrated many countries, so repatriation has become very easy.
Q21
Which one of the following is an impact of privatisation mentioned in the lesson?
- A. Positive impact on financial growth by decreasing deficits and debtsCorrect
- B. Abolition of the licence system
- C. Devaluation of the rupee
- D. Boom in the consumer products market
Explanation. Section 20.07 lists the impacts of privatisation: positive impact on financial growth by decreasing deficits and debts, higher efficiency of government undertakings, better goods and services, and making way for FDI.
Q22
A situation in which a country loses its most educated and talented workers to other countries through migration is called
- A. Brain drainCorrect
- B. Disinvestment
- C. Deregulation
- D. Repatriation
Explanation. The lesson defines brain drain as a country losing its most educated and talented workers to other countries through migration. Globalisation reduces it by creating employment opportunities in the home country.
Q23
Assertion (A): Dominance of foreign institutions is a disadvantage of globalisation.
Reason (R): Under globalisation, economic power shifts from independent industries to international organisations, which is a threat to national sovereignty.
- A. Both A and R are true and R is the correct explanation of ACorrect
- B. Both A and R are true but R is not the correct explanation of A
- C. A is true but R is false
- D. A is false but R is true
Explanation. Among the disadvantages of globalisation, the lesson explains dominance of foreign institutions as economic power shifting from independent industries to international organisations, a threat to national sovereignty. R explains A.
Q24
Which one of the following is NOT a highlight of the LPG policy?
- A. Introduction of new Foreign Trade Agreements
- B. Deregulation
- C. Tax reforms
- D. Introduction of the licence systemCorrect
Explanation. Section 20.11 lists the highlights of the LPG policy, which include new foreign trade agreements, deregulation, tax reforms and the abolition of licence. Introducing a licence system is the opposite of the policy.
Q25
Who is considered the architect of Indian economic reforms, who introduced the policy of liberalisation in India in 1991?
- A. Dr. Manmohan SinghCorrect
- B. Arthur Dunkel
- C. Jawaharlal Nehru
- D. Indira Gandhi
Explanation. A box in the lesson says the former Prime Minister of India, Dr. Manmohan Singh, is considered the architect of Indian economic reforms and introduced the policy of liberalisation in India in 1991.
Q26
Consider the following statements about the impact of globalisation:
1. Multinational corporations can manufacture, buy and sell goods worldwide.
2. Globalisation has led to a boom in the consumer products market.
3. The advent of foreign companies has led to job creation.
4. Globalisation has narrowed the gap between the rich and the poor.
Which of the statements given above are correct?
- A. 1, 2 and 3 onlyCorrect
- B. 1 and 4 only
- C. 2, 3 and 4 only
- D. 1, 2, 3 and 4
Explanation. Statements 1, 2 and 3 are listed as impacts of globalisation in section 20.10. Statement 4 is wrong: the lesson says globalisation widens the gap between rich and poor, an increase in inequalities.
