Aspirant Academy

Economy

Predicted Questions with Model Answers

Industry: Policy, Reforms, Globalization, Liberalization, Privatization, MSMEs

Paper I · Unit 2 Section 9 of 11 0 PYQs 26 min
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Predicted Questions with Model Answers

Q1. [5 marks — 50 words] Define MSMEs. State the revised definition (2020) with investment and turnover criteria.

Model Answer: MSMEs (Micro, Small and Medium Enterprises) are defined by the 2020 Atmanirbhar Bharat revision using dual criteria — investment and annual turnover. Micro: investment ≤ Rs 1 crore, turnover ≤ Rs 5 crore. Small: ≤ Rs 10 crore investment, ≤ Rs 50 crore turnover. Medium: ≤ Rs 50 crore investment, ≤ Rs 250 crore turnover. MSMEs contribute ~30% of GDP and 45% of India's exports.

Q2. [5 marks — 50 words] What were the main features of India's 1991 economic reforms (LPG)?

Model Answer: India's 1991 LPG reforms had three pillars: Liberalisation — industrial licensing abolished for all but defence and atomic energy; MRTP restrictions removed; import tariffs slashed. Privatisation — public sector reservation reduced from 17 to 2 sectors; disinvestment programme launched. Globalisation — FDI restrictions eased; FERA 1973 replaced by FEMA 2000; rupee made current account convertible. These ended the Licence Raj era.

Q3. [5 marks — 50 words] What are PLI schemes? Name any three sectors where they have been implemented.

Model Answer: Production Linked Incentive (PLI) schemes offer manufacturers 4–6% financial incentive on incremental sales above a base year for 4–6 years, boosting domestic manufacturing, FDI, and exports. India launched PLI for 14 sectors (2021) with total outlay of Rs 1.97 lakh crore. Three key sectors: (1) Mobile phones and electronics (Rs 41,000 crore), (2) Pharmaceuticals (Rs 15,000 crore), (3) Automobiles and auto components (Rs 25,938 crore).

Q4. [10 marks — 150 words] Explain Atmanirbhar Bharat Abhiyan. What are its industrial and economic policy dimensions?

Model Answer: Atmanirbhar Bharat Abhiyan (Self-Reliant India Campaign), announced by PM Modi on May 12, 2020, was India's comprehensive COVID-19 economic response with a stimulus package of Rs 20 lakh crore (~10% of GDP).

Five pillars: Economy (fiscal stimulus), Infrastructure (asset monetisation, industrial corridors), System (ease of doing business reforms), Vibrant Demographics (skill development), and Demand (consumption stimulus).

Industrial dimensions:

  • PLI Schemes for 14 sectors (Rs 1.97 lakh crore): incentivise incremental domestic manufacturing in mobile phones, pharmaceuticals, automobiles, solar PV, defence electronics, and more — targeting global supply chain integration.
  • MSME Support: Emergency Credit Line Guarantee Scheme (ECLGS) provided Rs 3 lakh crore in fully guaranteed collateral-free loans. MSME definition revised (investment + turnover dual criteria) to include more enterprises.
  • Import substitution: Three "Positive Indigenisation Lists" banning import of 509 defence items; similar lists for pharmaceuticals, electronics components.
  • Defence exports target: Rs 50,000 crore in defence exports by 2028, up from Rs 12,815 crore in 2022–23.
  • National Monetisation Pipeline (NMP): Rs 6 lakh crore target from monetising government infrastructure assets (roads, gas pipelines, telecom towers, warehouses) through PPP concessions.

Atmanirbhar Bharat repositioned India from supply-chain dependence (especially on China) to self-sufficient manufacturing, while using PLI incentives to attract global companies seeking China+1 alternatives.

Q5. [10 marks — 150 words] Analyse the impact of liberalisation on India's industrial sector since 1991.

Model Answer: India's 1991 liberalisation — triggered by a balance of payments crisis under PM Narasimha Rao and Finance Minister Dr. Manmohan Singh — fundamentally transformed the industrial landscape.

Positive impacts: First, GDP growth accelerated from the "Hindu rate of growth" (~3.5%) to an average 6–8% (1991–2024), driven by industrial and services expansion. Second, FDI increased dramatically from negligible levels to $70+ billion annually (2023–24), making India the 5th largest FDI recipient globally. Third, consumer welfare improved as import tariffs fell from ~300% to ~13% — goods like electronics, automobiles became affordable. Fourth, private sector, previously crowded out by PSU monopolies, now drives 60%+ of manufacturing output. Fifth, telecom, aviation, banking, insurance sectors transformed through competition — India has 1.2 billion mobile subscribers (world's 2nd largest).

Negative impacts: Industrial employment did not grow proportionately — manufacturing employment stagnated at ~12% of workforce while GDP share rose. Deindustrialisation affected handloom, small-scale industries unable to compete with imports. Regional inequality increased — industrially advanced states (Maharashtra, Karnataka, Tamil Nadu) attracted disproportionate FDI.

Overall, liberalisation catalysed India's integration with the global economy but requires complementary policies (skill development, infrastructure, social protection) to ensure inclusive industrial growth.

Q6. [5 marks — 50 words] What is the Competition Commission of India (CCI)? What is its role?

Model Answer: The Competition Commission of India (CCI), established under the Competition Act 2002 (operational 2009), promotes competition and prevents anti-competitive practices. It investigates cartels, bid-rigging, and abuse of dominant market position by large firms. It also regulates mergers that may substantially reduce competition. Notable actions include a Rs 1,337 crore penalty on Google (2022) for Android OS dominance. CCI replaced the older MRTP Commission.