Question:
The truth is that, despite the recent success of car-makers P and Q, India’s automobile industry is in a state not that different from the bad old days of the license-permit quota raj when two carmakers dominated a captive domestic market with substandard vehicles and with very little, if any, research and development, and low to negligible productivity growth.
High tariff barriers have certainly induced foreign automobile makers to enter the Indian market by setting up local operations, but this so-called “tariff jumping” foreign investment has produced an industry that is inefficient, operating generally at a low scale, and whose products are not globally competitive either in terms of cost or of innovation.
It is noteworthy that the automobile parts industry, which has faced low tariffs (as low as 12.5%) and has been largely deregulated, has been characterised by higher productivity and much better export performance than the completely-built units’ sector in the years since liberalisation.
(Adapted from an Op-Ed in {The Mint})
Which of the following statements can be inferred from the above?
The truth is that, despite the recent success of car-makers P and Q, India’s automobile industry is in a state not that different from the bad old days of the license-permit quota raj when two carmakers dominated a captive domestic market with substandard vehicles and with very little, if any, research and development, and low to negligible productivity growth.
High tariff barriers have certainly induced foreign automobile makers to enter the Indian market by setting up local operations, but this so-called “tariff jumping” foreign investment has produced an industry that is inefficient, operating generally at a low scale, and whose products are not globally competitive either in terms of cost or of innovation.
It is noteworthy that the automobile parts industry, which has faced low tariffs (as low as 12.5%) and has been largely deregulated, has been characterised by higher productivity and much better export performance than the completely-built units’ sector in the years since liberalisation.
(Adapted from an Op-Ed in {The Mint})
Which of the following statements can be inferred from the above?
High tariff barriers have certainly induced foreign automobile makers to enter the Indian market by setting up local operations, but this so-called “tariff jumping” foreign investment has produced an industry that is inefficient, operating generally at a low scale, and whose products are not globally competitive either in terms of cost or of innovation.
It is noteworthy that the automobile parts industry, which has faced low tariffs (as low as 12.5%) and has been largely deregulated, has been characterised by higher productivity and much better export performance than the completely-built units’ sector in the years since liberalisation.
(Adapted from an Op-Ed in {The Mint})
Which of the following statements can be inferred from the above?
Show Hint
When analyzing an industry’s performance, factors such as tariff barriers and deregulation can significantly influence productivity and competitiveness.
Updated On: Dec 19, 2025
- Low tariff barriers increase productivity.
- Tariff jumping leads to increases in productivity.
- Deregulation has worked for the automotive parts industry and therefore should be applied to completely-built units.
- P and Q do not invest enough in research and development.
Show Solution
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The Correct Option is A, C, D
Solution and Explanation
Step 1: Analyze the given information.
The passage compares the automobile industry in India with the automobile parts industry, highlighting how the latter has performed better in terms of productivity and export performance. The main factors influencing the automobile industry include tariff barriers and deregulation, while the automobile parts industry benefited from low tariffs and deregulation. The mention of substandard vehicles and low productivity for P and Q suggests inefficiency in these carmakers' operations.
Step 2: Evaluate the options.
- (A) Low tariff barriers increase productivity: The passage suggests that the automobile parts industry, which faced low tariffs, experienced higher productivity and better export performance, implying that low tariff barriers lead to increased productivity.
- (B) Tariff jumping leads to increases in productivity: The passage does not support this claim, as tariff jumping has led to an inefficient industry with low-scale operations, not an increase in productivity.
- (C) Deregulation has worked for the automotive parts industry and therefore should be applied to completely-built units: The passage mentions that the deregulated automobile parts industry has shown better productivity and export performance, suggesting that deregulation could work for the completely-built units’ sector as well.
- (D) P and Q do not invest enough in research and development: The passage indicates that the automobile industry, dominated by P and Q, had very little research and development, implying that they do not invest enough in this area.
Step 3: Conclusion.
The correct inferences are (A), (C), and (D) based on the passage's explanation of the issues with the automobile industry and the better performance of the automobile parts sector. Final Answer: (A), (C), (D)
The passage compares the automobile industry in India with the automobile parts industry, highlighting how the latter has performed better in terms of productivity and export performance. The main factors influencing the automobile industry include tariff barriers and deregulation, while the automobile parts industry benefited from low tariffs and deregulation. The mention of substandard vehicles and low productivity for P and Q suggests inefficiency in these carmakers' operations.
Step 2: Evaluate the options.
- (A) Low tariff barriers increase productivity: The passage suggests that the automobile parts industry, which faced low tariffs, experienced higher productivity and better export performance, implying that low tariff barriers lead to increased productivity.
- (B) Tariff jumping leads to increases in productivity: The passage does not support this claim, as tariff jumping has led to an inefficient industry with low-scale operations, not an increase in productivity.
- (C) Deregulation has worked for the automotive parts industry and therefore should be applied to completely-built units: The passage mentions that the deregulated automobile parts industry has shown better productivity and export performance, suggesting that deregulation could work for the completely-built units’ sector as well.
- (D) P and Q do not invest enough in research and development: The passage indicates that the automobile industry, dominated by P and Q, had very little research and development, implying that they do not invest enough in this area.
Step 3: Conclusion.
The correct inferences are (A), (C), and (D) based on the passage's explanation of the issues with the automobile industry and the better performance of the automobile parts sector. Final Answer: (A), (C), (D)
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