Matching Economic Policy Tools with Characteristics

This question asks us to match various economic policy tools and concepts listed in List-I with their corresponding characteristics described in List-II. Let's examine each term and its definition or role to find the correct match.

The terms are:

• Disinvestment: This involves the government selling its shares or stake in public sector undertakings (PSUs). It's a form of privatization.
• Outsourcing: This refers to a company or organization contracting out a specific business function or service to an external provider. This provider can be in the same country or a foreign country.
• Globalisation: This describes the increasing interconnectedness of the world's economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information.
• GATT (General Agreement on Tariffs and Trade): This was a legal agreement among many countries, whose purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. It was the precursor to the World Trade Organization (WTO) and administered multilateral trade agreements.

Now let's look at the characteristics in List-II:

1. Hiring of regular services from external source
2. Integration of the economy of the country with the world economy
3. To administer all multilateral trade agreements
4. Privatisation of public enterprises by selling off part of public equity sector

Let's match them based on our understanding:

• (A) Disinvestment fits best with (IV) Privatisation of public enterprises by selling off part of public equity sector. Disinvestment is precisely this process.
• (B) Outsourcing fits best with (I) Hiring of regular services from external source. This is the definition of outsourcing.
• (C) Globalisation fits best with (II) Integration of the economy of the country with the world economy. Globalisation is the process of economies becoming more integrated globally.
• (D) GATT fits best with (III) To administer all multilateral trade agreements. GATT's primary function was regulating international trade through multilateral agreements.

So, the correct matching is (A)-(IV), (B)-(I), (C)-(II), (D)-(III).

Let's present this match in a table:

The resulting correct combination is (A)-(IV), (B)-(I), (C)-(II), (D)-(III).

Revision Table: Economic Policy Tools

Additional Information on Economic Policies

Disinvestment is a strategic move by the government to reduce its ownership in Public Sector Undertakings (PSUs). The main goals often include raising revenue, improving efficiency of the PSUs, and promoting market competition. Selling equity is a common method.

Outsourcing is a common business practice today. It can help companies reduce costs, access specialized skills, and focus on their core business activities. Services like customer support, IT maintenance, or manufacturing processes are often outsourced.

Globalisation is a multifaceted phenomenon driven by reduced trade barriers, advancements in communication and transportation technology, and increased capital mobility. It affects not just economies but also cultures, politics, and the environment.

GATT was established in 1948 in the wake of World War II. Its aim was to create a system of trade rules to prevent protectionism, which was seen as a cause of the war. It operated through rounds of negotiations and was replaced by the World Trade Organization (WTO) in 1995, which continues to administer multilateral trade agreements.