CBSE 2025, Set 2

Question

(a) (i) "Import substitution policy, if not applied carefully, can be a double-edged sword for any economy."
Do you agree with the given statement? Justify your answer with valid arguments.

(ii) State how multilateral trade is different from bilateral trade.

Edvaya · Accepted Answer

The correct answer is Subjective. **(i) Import Substitution as a Double-Edged Sword:** Yes, I agree. Import-substitution policy aimed at replacing imports with domestic production to protect domestic industries from foreign competition and to save precious foreign exchange. However, protection from foreign competition may do more harm than good over time. The domestic producers, in the absence of a competitive market, won't have any incentive to modernize or improve the quality of their goods. In turn, consumers are forced to purchase low-quality items at a higher price. Hence, if not applied carefully (with sunset clauses), it breeds inefficiency. **(ii) Multilateral vs. Bilateral Trade:** **Multilateral trade** is the trade undertaken by a country with *more than two* nations to exchange goods and services simultaneously. Whereas, **bilateral trade** refers to a direct trade agreement and exchange of goods or services specifically between *two* countries.

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Economics > Indian Economic Development > Development Experience 1947 1990

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