Consider the following statements:
1. Assertion (A): An important policy instrument of economic liberalization is reduction in import duties on capital goods.
2. Reason (R): Reduction in import duties would help the local entrepreneurs to improve technology to face the global markets.
In the context of the above two statements, which one of the following is correct?
A
Both A and R are true and R is the correct explanation of A
B
Both A and R are true and R is not a correct explanation of A
C
A is true but R is false
D
A is false but R is true
Correct Answer: Option A
Explanation
1. Statement A (Assertion): Reducing import duties on capital goods is indeed an important policy instrument of economic liberalization. Lower duties make imported machinery and equipment cheaper, facilitating investment and modernization. So, A is true.
2. Statement R (Reason): Lower import duties on capital goods allow domestic entrepreneurs easier access to advanced technology embodied in imported machinery. This improved technology helps enhance productivity and quality, enabling firms to better compete in global markets. So, R is true.
3. Connection: Reason R correctly explains *why* reducing import duties on capital goods (Assertion A) is a key part of liberalization policy – because it facilitates technological upgrading for global competitiveness.
4. Therefore, both A and R are true, and R is the correct explanation of A.