India has suffered from persistent high inflation. Increase in administered prices, demand and supply imbalances, imported inflation aggravated by rupee depreciation, and speculation have combined to keep high inflation going. If there is an element common to all of them, it is that many of them are the outcomes of economic reforms. India's vulnerability to the effects of changes in international prices has increased with trade liberalisation. The effort to reduce subsidies has resulted in a continuous increase in the prices of commodities that are administered.

What is the most logical, rational and crucial message that is implied in the above passage?

Question

India has suffered from persistent high inflation. Increase in administered prices, demand and supply imbalances, imported inflation aggravated by rupee depreciation, and speculation have combined to keep high inflation going. If there is an element common to all of them, it is that many of them are the outcomes of economic reforms. India's vulnerability to the effects of changes in international prices has increased with trade liberalisation. The effort to reduce subsidies has resulted in a continuous increase in the prices of commodities that are administered.

What is the most logical, rational and crucial message that is implied in the above passage?

Accepted Answer

Economic reforms can often create a high inflation economy.

Answer

Under the present circumstances, India should completely avoid all trade liberalisation policies and all subsidies.

Answer

Due to its peculiar socio-economic situation, India is not yet ready for trade liberalisation process.

Answer

There is no solution in sight for the problems of continuing poverty and inflation in India in the near future.

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