(i) Explain briefly the rationale behind the 'License Raj' under the Industrial Policy Resolution, 1956. (ii) Explain disinvestment. "In the post-independence era, India adopted a protective tariff policy." Do you agree with the given statement ? Justify your answer with any two valid arguments.

Question

Accepted Answer

(i) **Rationale behind 'License Raj' under IPR 1956:**

1. **Control Private Sector:** To keep private sector under government control
2. **Regional Equality:** Licences easier to get in backward areas
3. **Prevent Monopolies:** Prevent concentration of economic power
4. **Planned Development:** Direct industrial development according to national priorities

(ii) **Disinvestment:**
- Selling part of equity of PSUs to private sector
- Purpose: Improve financial discipline and modernization
- Methods: Strategic sale, minority stake sale, IPO

**Protective Tariff Policy:**
I **agree** that India adopted protective tariff policy post-independence:
- High import duties to protect domestic industries
- Promoted import substitution industrialization
- Reduced dependence on foreign goods
- However, also led to inefficiency and limited competition