Read the following cause and effect pairs from the reform period:
(A) Reduction of tariff rates → Less scope for raising revenue through customs duties
(B) Removal of export duties → Better competitive position of Indian goods in international markets
(C) Tax incentives to foreign investors → More tax revenue for developmental and welfare spending
(D) Lifting of quantitative restrictions on imports of agricultural products → Indian farmers face greater international competition
Which of the pairs are correctly matched?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (D) only
(A) Reduction of tariff rates → Less scope for raising revenue through customs duties — Correct. Lower tariffs curtailed the revenue from customs duties.
(B) Removal of export duties → Better competitive position of Indian goods in international markets — Correct. Export duties were removed to make Indian goods more competitive abroad.
(C) Tax incentives to foreign investors → More tax revenue for developmental and welfare spending — Incorrect. The incentives reduced the scope for tax revenue, which hurt developmental and welfare spending.
(D) Lifting of quantitative restrictions on imports of agricultural products → Indian farmers face greater international competition — Correct. Farmers now face increased international competition.
NCERT (2026-27): “Trade and Investment Policy Reforms: … Export duties have been removed to increase the competitive position of Indian goods in the international markets.” “Reforms in Agriculture: … This sector has been experiencing a number of policy changes such as reduction in import duties on agricultural products, low minimum support price and lifting of quantitative restrictions on the imports of agricultural products. These have adversely affected Indian farmers as they now have to face increased international competition. …” “Reforms and Fiscal Policies: Economic reforms have placed limits on the growth of public expenditure, especially in social sectors. The tax reductions in the reform period, aimed at yielding larger revenue and curb tax evasion, have not resulted in increase in tax revenue for the government. Also, the reform policies, involving tariff reduction, have curtailed the scope for raising revenue through custom duties. In order to attract foreign investment, tax incentives are provided to foreign investors which further reduced the scope for raising tax revenues. This has a negative impact on developmental and welfare expenditures.” |