Which of the following should not be considered as an effective Trade Policy Reform?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Reduction in the taxes on individual incomes of tax payers
Trade policy governs a country’s imports and exports. The trade policy reforms of India’s New Economic Policy of 1991 aimed to open the economy to foreign trade, and had three parts:
Dismantling of quantitative restrictions (quotas) on imports and exports
Reduction of tariff rates, the customs duties charged on imports
Removal of licensing procedures for imports
These are Options (1), (2) and (3).
A cut in the tax on individual incomes is a fiscal (tax) policy reform: it changes the government’s revenue and people’s spending power, not the rules of foreign trade.