(c) Government wanted Indian producers to compete in the World Market.
The government felt that competition with global producers would improve the quality and performance of Indian producers.
Source: Liberalisation of foreign trade and foreign investment policy, Chapter 4
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The passage directly states: "The government decided that the time had come for Indian producers to compete with producers around the globe." This is the key line to remember. All other options are either not mentioned or incorrect as per the textbook. Always link liberalisation (1991) to the idea of improving producer performance through global competition.