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Which of the following is/are feature(s) of the New Economic Policy?

1. This set of policies can broadly be classified into two groups: the stabilization measures and the structural reform measures.

2. The policy was intended to move towards a lower economic growth rate and to build sufficient foreign exchange reserves.

3. It converted the Indian economy into a market economy by removing all kinds of unnecessary restrictions.


1. 1 and 2 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2 and 3

1 Answer

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Correct Answer - Option 3 : 1 and 3 only

The correct answer is 1 and 3. only.

  • India agreed to the conditionalities of the World Bank and IMF and announced the New Economic Policy (NEP) which consisted of wide-ranging economic reforms.
  • The thrust of the policies was towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms.
  • This set of policies can broadly be classified into two groups: the stabilization measures and the structural reform measures. Hence, Statement 1 is correct.
    • Stabilization measures are short-term measures, intended to correct some of the weaknesses that have developed in the balance of payments and to bring inflation under control.
      • There was a need to maintain sufficient foreign exchange reserves and keep rising prices under control.
    • Structural reform policies are long-term measures, aimed at improving the efficiency of the economy and increasing its international competitiveness by removing the rigidities in various segments of the Indian economy.
  • The government initiated a variety of policies that fall under three heads viz., liberalization, privatization, and globalization.
  • It converted the Indian economy into a market economy by removing all kinds of unnecessary restrictions. Hence, Statement 3 is correct.
  • The main objective of the policy was intended to move towards a higher economic growth rate and to build sufficient foreign exchange reserves. Hence, Statement 2 is incorrect.
  • The policy is aimed at increasing the participation of private players in all sectors of the economy.

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