During 1991-92 to 1998-99, which industrial sector showed a clear decline in the average annual growth according to the Index of Industrial Production (IIP)?

Correct option is C

The correct answer is (C) Basic and Capital Goods

Explanation:
• In the immediate post-reform period (1991-92 to 1998-99), the capital goods sector in India experienced a significant slowdown and a clear decline in its average annual growth rate compared to the pre-reform era.
• This decline occurred because the opening of the economy (reduction in import tariffs) exposed domestic heavy machinery and capital goods manufacturers to fierce international competition, for which they were initially unprepared.

Information Booster:
• Index of Industrial Production (IIP): An index detailing the growth of various sectors in an economy such as mining, electricity, and manufacturing. The base year is currently 2011-12.
• The capital goods sector represents machinery and equipment used by businesses to produce other goods.

Additional Knowledge:
• While general manufacturing faced some volatility, consumer durables actually saw rapid growth due to pent-up demand and foreign investment.
• The basic and capital goods sectors, historically shielded by the "Licence Raj," took the hardest initial hit during structural adjustment.