Difference Between Liberalisation, Privatisation and Globalisation with Examples
Liberalisation, Globalisation, and Privatisation (LPG reforms) are key concepts in Indian economic development and Business Studies. These reforms reshaped India’s economy after 1991. Mastering these topics helps students excel in Class 12 exams, competitive tests, and understand India’s modern economic journey.
| Concept | Definition | Example in India |
|---|---|---|
| Liberalisation | Removal of government restrictions and controls. | De-licensing of industries, reduction in import tariffs. |
| Privatisation | Transfer of ownership from public sector to private sector. | Sale of VSNL, BALCO, and Air India to private investors. |
| Globalisation | Integration with the world economy and markets. | Allowing foreign companies to invest in India, growth of IT exports. |
Introduction to Liberalisation, Privatisation, and Globalisation
Liberalisation, Privatisation, and Globalisation (LPG) refer to economic reforms that India adopted in 1991 to boost economic growth. Liberalisation removed government controls, Privatisation shifted public businesses to private hands, and Globalisation opened India to world markets. These reforms increased competition, investments, and efficiency in every industry.
MCQs on Liberalisation, Privatisation, and Globalisation (LPG)
Multiple-choice questions on LPG reforms test fundamental concepts, the differences between terms, and real-world applications. These are repeatedly asked in Commerce board exams and entrance tests.
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Which year were the LPG reforms introduced in India?
a) 1981
b) 1991
c) 2001
d) 1976
Answer: b) 1991 -
What is the main aim of liberalisation?
a) Increase government ownership
b) Reduce government restrictions
c) Increase subsidies
d) Nationalise core sectors
Answer: b) Reduce government restrictions -
Which company is an example of privatisation in India?
a) Indian Railways
b) State Bank of India
c) Air India
d) ONGC
Answer: c) Air India -
Opening Indian markets to foreign direct investment is related to:
a) Nationalisation
b) Globalisation
c) Central planning
d) Import substitution
Answer: b) Globalisation -
Which was NOT a part of LPG reforms?
a) Industrial licensing removal
b) Expansion of public sector
c) Privatisation of public enterprises
d) Reduction in trade barriers
Answer: b) Expansion of public sector -
Which sector saw major change due to liberalisation?
a) Telecom
b) Mining
c) Banking
d) All of the above
Answer: d) All of the above -
Which international institution supported LPG reforms in India?
a) United Nations
b) IMF
c) Red Cross
d) UNESCO
Answer: b) IMF -
Globalisation mainly results in:
a) Closed economy
b) Export restrictions
c) Integration with world markets
d) Price control
Answer: c) Integration with world markets -
Selling government shares to private firms is called:
a) Nationalisation
b) Disinvestment
c) Federalism
d) Devaluation
Answer: b) Disinvestment -
After LPG reforms, which sector grew rapidly in India?
a) Agriculture
b) Information Technology
c) Fishing
d) Artisanal crafts
Answer: b) Information Technology
MCQ Explanations & Rationales
| Question | Answer | Explanation |
|---|---|---|
| Year LPG reforms introduced | 1991 | LPG reforms began in 1991 due to economic crisis. |
| Main aim of liberalisation | Reduce government restrictions | Liberalisation means less government control over businesses. |
| Privatisation example | Air India | Air India was transferred from public to private sector recently. |
| Opening to FDI relates to | Globalisation | Globalisation brings foreign capital and companies into India. |
| Not part of LPG reforms | Expansion of public sector | LPG reforms reduced public sector dominance. |
| Sectors changed by liberalisation | All of the above | Telecom, mining, and banking all saw major reforms. |
| Institution that supported reforms | IMF | The IMF lent to India in return for reforms. |
| Main result of globalisation | Integration with world markets | Globalisation connects India’s economy globally. |
| Govt share sale is called | Disinvestment | Disinvestment is the selling of PSU shares to private entities. |
| Sector that grew after reforms | Information Technology | IT sector boomed as a result of global connectivity and liberal policies. |
Differences Between LPG Concepts: Table Overview
| Aspect | Liberalisation | Privatisation | Globalisation |
|---|---|---|---|
| Meaning | Removing controls | Public to private ownership | Connecting with the world |
| Main Impact | More freedom to businesses | Less government business role | Access to global markets |
| Example | Abolishing industrial licensing | Air India sold to Tata group | Walmart, Amazon entering India |
LPG Reforms in Real Life
LPG reforms changed how companies operate, buy, and sell in India. Real-life examples include private telecom networks replacing state monopolies and growth of Indian companies like Infosys due to global outsourcing demand. These changes improved efficiency, brought foreign investment, and made Indian goods more competitive worldwide.
Downloadable Resources for MCQ Practice
For more self-study, download a comprehensive PDF covering solved MCQs and explanations on Liberalisation, Privatisation, and Globalisation. Use this resource for school revision or competitive exam preparation.
Download PDF: LPG MCQs & Explanations
Relevant Interlinks for Further Study
- Liberalisation
- Globalisation
- Privatisation
- Introduction to LPG
- Indian Economy During Reforms
- Features of Company
- Business Environment
- International Business
- Government Deficit
- Development of Public Enterprises in India
- Globalization and the Indian Economy
In summary, Liberalisation, Privatisation, and Globalisation are crucial concepts that have shaped modern India’s economy. Understanding their differences and impact helps students answer exam MCQs, understand real-world economics, and succeed in Commerce studies. At Vedantu, comprehensive explanations, MCQs, and downloadable resources support your learning journey on LPG reforms.
FAQs on Liberalisation, Globalisation and Privatisation (LPG) MCQs for Commerce
1. What is liberalisation, privatisation, and globalisation (LPG)?
Liberalisation, Privatisation, and Globalisation (LPG) are interconnected economic reforms. Liberalisation involves reducing government control over the economy. Privatisation shifts state-owned assets to private entities. Globalisation integrates the national economy with the global market through increased trade and investment.
2. What is LPG in economics?
In economics, LPG refers to the combined set of policies encompassing liberalisation (reducing government control), privatisation (transferring state-owned assets to the private sector), and globalisation (integrating with the global economy). These reforms aim to boost economic growth.
3. What is the difference between liberalisation, privatisation, and globalisation?
Liberalisation focuses on deregulation and reducing government intervention. Privatisation transfers ownership of businesses from the public sector to the private sector. Globalisation involves increased interconnectedness of national economies through trade, investment, and technology. They are distinct but interconnected reforms.
4. Why were LPG reforms introduced in India in 1991?
India introduced LPG reforms in 1991 primarily to address a severe balance of payments crisis and stimulate economic growth. The reforms aimed to attract foreign investment, increase efficiency, and improve competitiveness in the global market.
5. What are some examples of globalisation in India?
Examples of globalisation in India include: increased Foreign Direct Investment (FDI), growth of multinational corporations, participation in international trade agreements (like the WTO), and the rise of outsourcing and offshoring.
6. What are the advantages of LPG reforms?
LPG reforms offer several advantages, including increased economic growth, improved efficiency, greater competition, higher foreign investment, and greater integration into the global economy. However, they also have potential drawbacks such as increased inequality and job displacement in some sectors.
7. What is the main difference between liberalisation and privatisation?
Liberalisation reduces government control over the economy, while privatisation transfers ownership of state-owned assets to private entities. Both are components of broader economic reforms, but they address different aspects of market regulation and ownership.
8. How did LPG reforms change the Indian business environment?
LPG reforms significantly changed the Indian business environment by creating a more competitive and market-oriented economy. This included deregulation, reduced bureaucratic hurdles, and increased opportunities for private sector participation. The business environment became more dynamic and globally integrated.
9. Where can I find MCQs on LPG reforms for Class 12?
MCQs on LPG reforms for Class 12 can be found in various textbooks, online resources, and practice materials. Vedantu provides comprehensive study materials including practice questions and quizzes aligned with the CBSE syllabus for Class 12 Commerce.
10. Which industries benefited most from privatisation after 1991?
Industries that greatly benefited from privatisation after 1991 include telecommunications, power generation, and some segments of the manufacturing sector. Increased competition and efficiency led to improvements in these sectors. However, the impact varied across different industries.
11. How is globalisation related to economic growth and foreign investment?
Globalisation is closely linked to economic growth and foreign investment. Increased trade and integration attract foreign capital, leading to economic expansion. Globalisation also enhances access to technologies and markets, boosting economic growth further. However, the relationship isn't always straightforward, and careful management is necessary.
12. Can a country liberalise without privatising? Give examples.
Yes, a country can pursue liberalisation without full-scale privatisation. Liberalisation focuses on deregulation and reducing government control, while privatisation involves transferring ownership. Many countries have undertaken partial liberalisation measures without significant privatisation. The specific examples will depend on national circumstances and priorities.
13. What exam mistakes are common in LPG MCQ sections?
Common mistakes in LPG MCQ sections include confusing the definitions of liberalisation, privatisation, and globalisation; failing to understand the interrelationships between these concepts; and misinterpreting case studies or examples. Thorough revision and practice are key to avoiding these errors.
