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Q88 (IAS/2000) Economy › External Sector & Trade › Trade policy reforms Answer Verified

Assertion (A) : The rate of growth of India’s exports has shown an appreciable increase after 1991. Reason (R) : The Govt. of India has resorted to devaluation.

Result
Your answer: —  ·  Correct: A
Explanation

The correct answer is Option 1.

Following the 1991 Economic Reforms, India transitioned from a protectionist regime to an export-oriented growth model. Assertion (A) is true as India’s export growth rate surged significantly due to trade liberalization, removal of quantitative restrictions, and integration with global markets.

Reason (R) is also true and provides the correct explanation for the surge. In July 1991, the Government of India and the RBI resorted to a two-step devaluation of the Rupee (approximately 18-20%). Devaluation makes domestic goods cheaper and more competitive in the international market, thereby directly incentivizing and increasing the volume of exports. This monetary adjustment, combined with the transition to a market-determined exchange rate system (LERMS), was a fundamental driver behind the "appreciable increase" in export performance during the post-reform period.

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SIMILAR QUESTIONS

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