Economic Reforms Since 1991 test - 5

Foreign capital comes to India from both of these sources, i.e., loans from abroad as well as foreign direct investment (FDI).

Non tariff barriers include restrictions on both the quantity and quality of the commodity that can be imported. Commodities can be imported neither in a higher quantity nor of a lower quality than specified.

Privatisation of the public sector enterprises by selling off part of the equity of PSEs to the general public or private entities is known as disinvestment.

Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with the RBI.

Fiscal policy is the revenue (which comes from taxation) and expenditure policy of the government.

Fiscal deficit arises when government expenditure is more than government revenue and therefore the balance is met through borrowings.

Inwards foreign direct investment brings in foreign exchange, management expertise as well as modern technology.

The industrial policy of 1991 dereserved many of the industries which were previously reserved only for the public sector allowing the entry of the private sector. There are only 3 industries which are now reserved for the public sector.

Foreign Exchange Reserves had fallen to unmanageable levels, the government was not able to generate revenue from taxation due to rampant tax evasion and the public sector was also not reporting high incomes.

Privatisation is important because the private capital and managerial capabilities can be effectively utilised to improve the performance of the PSUs and minimise wastages.