Q. With reference to the New Industrial Policy of 1991, consider the following statements:
1.It abolished industrial licensing for most industries, thereby reducing state control over the industrial sector.
2.It promoted foreign investment by encouraging both Foreign Direct Investment (FDI) and Portfolio Investment Scheme (PIS).
Which of the statements given above is/are correct?
Quarterly-SFG-Jan-to-March
Red Book

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C
Notes:

Explanation:

  • The policy drastically reduced the number of industries requiring compulsory licenses, thereby dismantling the License Raj and limiting state control.
  • For the first time, India actively encouraged foreign investment through FDI (e.g., Enron, Coca-Cola) and later through the Portfolio Investment Scheme (PIS) introduced in 1994 for foreign institutional investors.

Source- 11th NCERT: Economics: Indian Economic Development and TMH Indian Economy by Ramesh Singh

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