question_answer

Why is 'tax' on imports known as a trade barrier Why did the Indian Government impose barriers to foreign trade and foreign investments after Independence? Give three reasons.                                             [AI 2008]

Answer:

Tax on imports is known as a trade barrier because government can use it to increase or decrease (regulate) foreign trade.

Reasons behind imposition of barriers after Independence were as follows :

(i) To protect the producers within the country from foreign competition.

(ii) To safeguard the industries which were just coming up in the 1950s and 1960s from competition from imports.

(iii) To allow imports of only essential items such as machinery, fertiliser petroleum, etc.