India has suffered from persistent high inflation. Increase in administered prices, demand and supply imbalances, imported inflation aggravated by rupee depreciation, and speculation - have combined to keep high inflation going. If there is an element common to all of them, it is that many of them are the outcomes of economic reforms. India's vulnerability to the effects of changes in international prices has increased with trade liberalisation. The effort to reduce subsidies has resulted in a continuous increase in the prices of commodities that are administered. What is the most logical, rational and crucial message that is implied in the above passage?
- AUnder the present circumstances, India should completely avoid all trade liberalisation policies and all subsidies
- BDue to its peculiar socio-economic situation, India is not yet ready for trade liberalisation process
- CThere is no solution in sight for the problems of continuing poverty and inflation in India in the near future
- DEconomic reforms can often high inflation economy.Correct
Explanation
The passage explicitly states that many of the factors contributing to persistent high inflation in India "are the outcomes of economic reforms." It provides examples like increased vulnerability due to trade liberalisation and price increases from efforts to reduce subsidies, both of which are economic reforms. Therefore, the most logical and crucial message is that economic reforms can often lead to or contribute to a high inflation economy.
A) This is an extreme and prescriptive solution not implied by the passage, which only points out a consequence of reforms, not that they should be completely avoided. B) The passage discusses the effects of trade liberalisation but does not make a judgment on India's readiness for the process due to its socio-economic situation. C) The passage focuses on inflation and its link to reforms, not on poverty or the lack of solutions for future problems. This is an overly broad and pessimistic conclusion not supported by the text. D) This option directly captures the central argument of the passage, which repeatedly links the causes of high inflation to the outcomes of economic reforms.
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