As part of the 1991 economic liberalisation initiatives, which measure was specifically implemented to facilitate the flow of global capital into the domestic market?

The correct answer is Automatic clearance mechanism for foreign equity participation.

Explanation:
In July 1991, India launched sweeping New Economic Policy (NEP) reforms aimed at liberalisation, privatisation, and globalisation. A primary objective was to invite foreign direct investment (FDI) and facilitate the flow of global capital into the domestic market.

To achieve this, the government introduced an automatic clearance mechanism for foreign equity participation up to 51% in 34 high-priority industrial sectors. This reform eliminated the need for prior bureaucratic approval from regulatory authorities for eligible investments, significantly simplifying the entry process for international investors and foreign equity capital.

Evaluation of Other Options:
• Imposition of heightened import tariffs: Incorrect. The 1991 liberalisation measures aimed to lower peak import tariffs to promote international trade, rather than increasing them.
• Expansion of state-reserved industrial sectors: Incorrect. The number of industries reserved exclusively for the public sector was dramatically reduced (from 17 to 8 initially), opening up more space for private and foreign capital.
• Re-enforcement of rigid import licensing requirements: Incorrect. Import licensing requirements were largely abolished for capital goods and intermediate products to make trading simpler and more efficient.