Which of the following are the consequences of the policy of protectionism 1 More choice for domesti...........

Economic Affairs Balance of Payments

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Which of the following are the consequences of the policy of protectionism?

1. More choice for domestic consumers

2. Higher cost of domestic goods

3. Helps domestic industries to compete against foreign players.

4. Reduction in forex reserves of the nation.

Select the correct answer using the code given below:

1 and 3 only

1 and 4 only

2 and 3 only

2 and 4 only

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Explanation:

Statement 1 is incorrect. Restriction on imports and restrictions on entry of foreign companies to India leads to lesser competition for domestic players and lesser choice for the consumers. The Indian consumers will have to purchase whatever the Indian producers produce.
o Statement 2 is correct. Because of lesser competition, domestic players have greater incentive to sell their goods at higher price.
o Statement 3 is correct. This policy by ways of tariffs and quotas helps domestic industries compete against foreign players.
o Statement 4 is incorrect. As a result of protectionism, import of goods are restricted. This results in lesser imports and thus helps in saving of precious forex reserve.