Unit 8: Foreign Trade Policy, Foreign Investment and Economic Development (JAIIB - MODULE A)
1. What was a key structural change in India's foreign trade during the 1990s?
A. Complete ban on imports
B. Nationalization of all exports
C. Liberalization and reduction of trade barriers
D. Fixed export quotas for all goods
During the 1990s, India liberalized its trade policy, reduced tariffs, and removed many quantitative restrictions to integrate with the global economy.
2. The Foreign Trade Policy (2015–2020) mainly aimed to:
A. Ban all foreign investments
B. Promote "Make in India" and increase exports
C. Limit exports to neighbouring countries only
D. Introduce high import duties on all goods
The FTP 2015–2020 aimed at boosting exports, encouraging manufacturing under "Make in India," and facilitating foreign trade growth.
3. Which of the following incentives was provided under FTP 2015–2020?
A. Free land for all exporters
B. Tax exemption for domestic consumption
C. Restriction on technology imports
D. Duty credit scrips to promote exports
Duty credit scrips under FTP allowed exporters to pay customs duties on imported inputs, thereby promoting export competitiveness.
4. Which foreign investment policy change was significant after 1991 liberalization?
A. FDI allowed in many sectors with automatic approval
B. FDI completely banned in all sectors
C. Only portfolio investment allowed
D. FDI allowed only in banking sector
Post-1991 reforms allowed foreign direct investment (FDI) in many sectors under automatic route, attracting global investment and technology.
5. One of the major challenges that the upcoming FTP needs to address is:
A. Reducing domestic production capacity
B. Enhancing export competitiveness in global markets
C. Increasing import tariffs on essential goods
D. Limiting trade with developing countries
FTP needs to make Indian exports more competitive globally through incentives, improved logistics, and supportive policies.
6. A key concern for the upcoming FTP is to:
A. Ban foreign technology collaborations
B. Reduce domestic investment in manufacturing
C. Limit exports to certain countries
D. Simplify compliance procedures for exporters
Simplifying documentation and compliance procedures helps exporters save time and cost, encouraging more trade under the new FTP.
7. Which challenge is critical for India to attract more foreign direct investment (FDI) under upcoming FTP reforms?
A. Increasing import tariffs
B. Reducing domestic workforce
C. Providing stable policy and investment incentives
D. Restricting technological collaborations
Stable policies and incentives encourage foreign investors to commit long-term capital in India, boosting exports and economic growth.
8. How can the upcoming FTP support small and medium enterprises (SMEs) in India?
A. By providing easier access to export finance and credit guarantees
B. By banning SME participation in exports
C. By increasing documentation requirements
D. By restricting SME technology adoption
FTP can support SMEs by easing access to finance, simplifying procedures, and providing incentives for global market entry.
9. Which sector’s competitiveness is often a focus area in upcoming FTP revisions?
A. Domestic consumption only
B. Manufacturing and export-oriented sectors
C. Real estate sector
D. Only agriculture for domestic sale
FTP focuses on improving manufacturing and export sectors to enhance global competitiveness and promote economic growth.
10. Which challenge is related to trade facilitation that the upcoming FTP must address?
A. Limiting e-commerce exports
B. Increasing paperwork for SMEs
C. Restricting trade routes
D. Improving logistics, customs clearance, and port efficiency
Efficient logistics, smoother customs procedures, and port efficiency reduce cost and time for exporters, strengthening trade facilitation.
11. Which of the following best defines Foreign Direct Investment (FDI)?
A. Short-term investment in stocks and bonds
B. Investment only in government securities
C. Long-term investment by a foreign entity to acquire a lasting interest in an enterprise
D. Any foreign aid received by a country
FDI refers to foreign entities investing in a company or enterprise with a long-term interest, often involving ownership or control.
A. Stocks, bonds, and other financial assets in the short to medium term
B. Land and real estate only
C. Government-controlled enterprises only
D. Only export-oriented units
FIIs invest in financial assets like equities, bonds, and mutual funds, usually with a short-to-medium-term horizon.
13. Which sector has recently seen the highest FDI inflow in India?
A. Agriculture
B. Textile manufacturing
C. Retail trade
D. Services, including IT and telecom
Services like IT, telecom, and e-commerce have attracted the largest FDI inflows due to liberalized policies and high growth potential.
14. Recent trends in FII investment in India indicate:
A. Complete withdrawal from all equity markets
B. Fluctuating investments influenced by global economic conditions and interest rates
C. Only long-term holdings in government bonds
D. Steady increase without any influence of global events
FII investments are volatile and influenced by global interest rates, geopolitical risks, and domestic economic performance.
15. Which government initiative has significantly boosted recent FDI inflows in India?
A. "Make in India" and sectoral liberalization
B. Increasing import tariffs
C. Restricting foreign ownership in all sectors
D. Ban on portfolio investments
Policies like "Make in India," ease of doing business reforms, and sectoral liberalization have attracted higher FDI inflows in recent years.
16. Which of the following best describes economic growth?
A. Improvement in quality of life and social indicators
B. Expansion of social and cultural institutions
C. Increase in a country's output of goods and services over time
D. Reduction in income inequality
Economic growth refers to the quantitative increase in a country's production of goods and services, usually measured by GDP or GNP.
17. How does economic development differ from economic growth?
A. Economic development only focuses on GDP growth
B. Economic development includes improvement in living standards, education, and healthcare
C. Economic development ignores social welfare
D. Economic development is measured purely by industrial output
Economic development is a broader concept that includes economic growth along with social progress, better health, education, and overall quality of life.
18. Which indicator is commonly used to measure economic development?
A. Human Development Index (HDI)
B. Annual GDP growth rate only
C. Stock market index
D. Export volume alone
HDI combines indicators like life expectancy, education, and per capita income to measure human and social development, not just economic growth.
19. Which of the following can occur even if a country has high economic growth but low economic development?
A. Improved literacy and healthcare
B. Better quality of life for all citizens
C. Reduction in poverty rates
D. Unequal wealth distribution and poor social indicators
A country can experience high GDP growth without improvements in living standards, healthcare, education, or income equality.
20. Which policy approach focuses on economic development rather than only economic growth?
A. Policies promoting only industrial output
B. Inclusive growth policies, social welfare programs, and education initiatives
C. Import restrictions on all goods
D. Tax cuts for large corporations only
Policies targeting human development, education, healthcare, and social inclusion promote overall economic development beyond mere growth.
21. Why is economic development considered an important dimension of national progress?
A. It only increases industrial output
B. It focuses solely on export earnings
C. It improves living standards, reduces poverty, and promotes social welfare
D. It limits foreign investment
Economic development reflects holistic progress, including better healthcare, education, income distribution, and overall quality of life.
22. Which of the following is a social dimension of economic development?
A. Literacy rates and healthcare improvements
B. Increase in industrial production only
C. Foreign investment inflows alone
D. Stock market growth only
Social dimensions include improvements in education, health, and human capabilities, which are integral to economic development.
23. Which economic dimension indicates overall resource utilization and production efficiency?
A. Social dimension
B. Economic dimension
C. Environmental dimension
D. Political dimension
The economic dimension focuses on production, investment, income generation, and efficient use of resources to drive growth.
24. Environmental sustainability as a dimension of economic development emphasizes:
A. Increasing industrial output at any cost
B. Import substitution policies
C. Limiting foreign investments
D. Preserving natural resources while promoting growth
Sustainable development integrates environmental conservation with economic growth to ensure resources for future generations.
25. Inclusive growth as a dimension of economic development refers to:
A. Growth benefiting only large corporations
B. Growth that provides opportunities and benefits to all sections of society
C. Increasing exports without improving domestic welfare
D. Limiting industrial growth in urban areas
Inclusive growth ensures that economic progress reaches all sections, reducing inequality and promoting social development.
26. Which of the following is a key indicator of economic development?
A. Human Development Index (HDI)
B. Annual rainfall only
C. Number of multinational companies
D. Stock market capitalization
HDI measures economic development by combining life expectancy, education, and per capita income, reflecting human well-being.
27. Which policy measure promotes inclusive economic development?
A. Focusing only on large industries
B. Restricting foreign trade
C. Providing microfinance and skill development for marginalized groups
D. Limiting rural employment schemes
Microfinance, skill training, and employment programs help marginalized populations participate in economic growth, promoting inclusivity.
28. Which of the following reflects environmental sustainability in economic development?
A. Increasing industrial output without limits
B. Using renewable resources and minimizing pollution
C. Reducing education expenditure
D. Promoting only urban development
Sustainable practices ensure that natural resources are preserved while promoting growth, balancing economic and environmental goals.
29. A bank officer is reviewing export financing. Which indicator helps assess economic development impact?
A. Number of ATM transactions
B. Repo rate only
C. Import volume only
D. Increase in employment and SME growth due to exports
Export financing that generates jobs and supports SME growth contributes to broader economic development, not just growth statistics.
30. Which approach ensures both economic growth and development?
A. Growth focused only on high GDP sectors
B. Balanced policies integrating industrial growth, social welfare, and sustainability
C. Restricting foreign trade
D. Focusing solely on urban infrastructure
Policies combining industrial growth, social welfare programs, environmental sustainability, and inclusivity achieve both growth and development.
