IAI Actuarial Core Principles · Business Economics · Globalisation and multinational business
A major driver of globalisation since 1991 in India has been trade and investment liberalisation. Which of the following is an example of such liberalisation?
Reducing average import tariffs and easing foreign direct investment limits, for example in insurance, is liberalisation. It lowers barriers to cross-border trade and capital flows, promoting globalisation, whereas licensing, import bans and exchange restrictions reduce integration.
- ARaising the licence requirement for industrial capacity
- BReducing average import tariffs and easing limits on foreign direct investment in sectors such as insuranceCorrect
- CBanning imports of capital goods
- DFixing the rupee at a rate set by the government with no convertibility on current account
- Restricting foreign firms to minority stakes of zero percent
Explanation
Liberalisation lowers barriers to trade and capital flows. Cutting tariffs and raising FDI limits does this, while licensing, import bans and tight exchange restrictions do the opposite.
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