Correct Answer: Both assertion and reason are true, and the reason is the correct explanation of the assertion.

Solution : The correct answer is (a) Both assertion and reason are true, and the reason is the correct explanation of the assertion.

The assertion states that external sector reforms aimed to liberalize foreign trade and investment policies, which is true. These reforms were implemented to reduce trade barriers, promote exports, attract foreign investments, and integrate the Indian economy with the global market.

The reason provided is also true. Liberalized policies do attract foreign capital and enhance competitiveness. When trade and investment policies are liberalized, it creates a more favorable environment for foreign investors, encourages cross-border trade, and promotes economic growth.

Therefore, both the assertion and reason are true, and the reason correctly explains the assertion.