UPSC Prelims 1996·GS1·economy·open economy

Assertion (A): An important policy instrument of economic liberalization is reduction in import duties on capital goods. Reason (R): Reduction in import duties would help the local entrepreneurs to improve technology to face the global markets. In the context of the above two statements, which one of the following is correct?

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  1. ABoth A and R are true and R is the correct explanation of ACorrect
  2. BBoth A and R are true and R is not a correct explanation of A
  3. CA is true but R is false
  4. DA is false but R is true

Explanation

The correct answer is A because both statements are logically linked in the context of economic reforms. Assertion A is true because economic liberalization aims to integrate the domestic economy with the global market. Reducing import duties on capital goods like machinery and equipment makes it cheaper for domestic industries to acquire advanced production tools. Reason R is true and provides the correct explanation because the primary goal of lowering these duties is to enable local manufacturers to modernize their production processes. By accessing better technology at a lower cost, domestic entrepreneurs can increase efficiency, improve product quality, and compete effectively with international brands in the global market. Therefore, R directly explains the policy objective stated in A.
economy: Assertion (A): An important policy instrument of economic liberalization is reduction in import duties on capital goods.
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