Question

What is the free-market system?

• A. An economic system based on the market forces of supply and demand with no external interferences from the government.
• B. An economic system based on the market forces of supply and demand with little or no external interferences from the government.
• C. An economic system in which governmental regulations hinder the market forces of supply and demand.
• D. An economic system in which the government exercises complete control over the means of production.

Answer 1

The correct option is B An economic system based on the market forces of supply and demand with little or no external interferences from the government.

With a rising fiscal deficit and declining foreign exchange reserves, India was on the verge of an economic crisis in 1991. The then Indian Prime Minister, P V Narasimha Rao, initiated a spate of structural reforms to further liberalise the Indian economy. These reforms were dubbed as LPG reforms (liberalisation, privatisation, and globalisation). These reforms restricted the control of the government over the means of production and allowed for greater foreign investment in several major strategic sectors. These reforms led to marked improvement in several key economic indicators like increase in national GDP, declining poverty rate, fall in unemployment rate, etc.