Question

'Barriers on foreign trade and foreign investment were removed to a large extent in India since 1991.' Justify the statement

Why have the barriers on foreign trade and foreign investment been removed to a large extent by the Indian Government? Explain.

Answer 1

In 1990s, the government wished to remove barriers on foreign trade and foreign investment because it felt that domestic producers were ready to compete with foreign industries. It felt that foreign competition would in fact improve the quality of goods produced by Indian industries. This decision was also supported by powerful international organisations. Thus, barriers on foreign trade and foreign investment were removed to a large extent in India since 1991. In this regard, government adopted liberalisation policy as a part of a structural readjustment program. Liberalisation refers to the process of opening-up of the economy to foreign trade. It is done by removing trade barriers and encouraging imports and exports. Initially undertaken at the behest of WTO, the liberalisation reforms are still being continued. Liberalisation opened the Indian economy to foreign markets. As a result, international trade increased tremendously, which enormously benefitted the Indian economy.

Answer 2

Barriers on foreign trade and foreign investment have been removed to a large extent by the Indian government due to the following reasons:

To bring India out of the economic depression of 1991.

To open up markets for the Indian industries in the foreign market.

To increase the import tax so that goods can be easily exchanged between countries.