Import Tariffs Following 1991 Trade Reforms

The question asks about the trend of import tariffs subsequent to the trade liberalisation efforts initiated around 1991. Understanding this requires looking at the economic policies implemented during that period.

Understanding Trade Liberalisation

Trade liberalisation refers to policies aimed at reducing barriers to international trade. These barriers can include tariffs (taxes on imported goods), quotas (limits on the quantity of imported goods), and non-tariff barriers. The goal is typically to foster greater competition, encourage efficiency, and integrate the domestic economy more closely with the global market.

Impact on Import Tariffs Post-1991

The year 1991 marked a significant turning point in India's economic history, with the introduction of major economic reforms aimed at liberalisation, privatisation, and globalisation. A key component of these reforms was the reduction of trade barriers.

• Gradual Reduction: Following the 1991 reforms, import tariffs, which were previously quite high, were systematically and gradually reduced over the subsequent years. This was a deliberate policy choice to make imports cheaper, increase competition for domestic industries, and reduce the cost of essential inputs for production.
• Phased Approach: The reduction was not a sudden drop but a phased process, allowing industries time to adjust to the increased competition.
• Rationale: The reduction aimed to achieve several objectives:
  • Enhance competitiveness of domestic industries.
  • Reduce inflation by lowering the cost of imported goods and inputs.
  • Encourage foreign investment and technology transfer.
  • Streamline import procedures.

Analysis of Options

Let's analyze why the other options are incorrect in the context of the 1991 reforms:

• It increased: This is contrary to the principles of trade liberalisation, which involves lowering barriers, not raising them.
• It remained unchanged: The reforms explicitly targeted the reduction of trade barriers, so tariffs could not have remained unchanged.
• It was replaced with import bans: Liberalisation aims to open up trade, while import bans are a form of trade restriction. Replacing tariffs with bans would be counterproductive to liberalisation goals.

Therefore, the most accurate description of what happened to import tariffs after 1991 is that they gradually reduced as part of the broader economic liberalisation strategy.