Read the following statements about Trade Policy Reform:
Statement I: Trade policy reform in India involved removing quantitative restrictions on imports and exports.
Statement II: Trade policy reform increased import licensing to support domestic manufacturers.
Show answer & explanation
Correct answer: D
Explanation
Answer: Only Statement I is correct
Explanation
India’s trade policy reforms (post-1991 liberalization) were part of the broader economic reforms introduced after the balance of payments crisis.
Statement I is correct:
Trade policy reform involved:
Removal of quantitative restrictions (QRs) on imports and exports
Reduction in tariffs and trade barriers
Liberalization of foreign trade to integrate with the global economy
Statement II is incorrect:
Trade reforms did not increase import licensing
Instead, they aimed to reduce licensing and controls
The goal was to encourage competition, efficiency, and global trade integration, not protect domestic manufacturers through stricter licensing
These reforms are associated with liberalization policies introduced in 1991.
Additional Key Points
Part of the New Economic Policy 1991
Key objectives:
Liberalization
Privatization
Globalization (LPG reforms)
Import licensing was largely dismantled for most goods
India moved from a controlled economy to a market-oriented system
Export procedures were simplified to boost global trade
Potential Questions & Answers
Q. Which economic policy introduced trade liberalization in India?
Ans: New Economic Policy 1991
Q. What does LPG stand for in Indian economic reforms?
Ans: Liberalization, Privatization, Globalization