Economist: At the insistence of the International Monetary Fund, India

Question

Economist: At the insistence of the International Monetary Fund, India slashed import duties from an average of 90 percent in 1991 to 30 percent in 1997. Many feared that the result would be a devastating drop in Indian manufacturing due to competition with imported goods, but the doomsayers were wrong. Manufacturing output increased by 50 percent in that time. The increase was due to the decrease in duties, since, with the decrease, imports of goods used in manufacturing were much higher than imports of consumer goods.

Which of the following, if true, would most strengthen the economist’s argument?

Which of the following, if true, would most strengthen the economist’s argument?

A. A significant portion of manufacturers in India continued to produce goods from the same raw materials as before 1997 but at much lower cost.
B. Manufacturing increased significantly worldwide after 1992.
C. Production of goods and services in India was significantly enhanced by an increase in telecommunication infrastructure in the 1990s.
D. Economic growth did not increase everywhere in India in the 1990s and 2000s.
E. Much of the increase in manufacturing output was of goods for export.

akrockheartz19 · Answer

Not sure why A is the correct answer.

The passage says that Manufacturing output increased by 50% in that time.

However, if choice A is true, the cost of purchasing went down. The plant capacity could still be the same. Not sure how that links with the conclusion.

prodigyazu · Answer

I made the same mistake but then realised A is wrong. It is given in the stimulus that the increase in manufacturing output was due to the decrease in duties, since, with the decrease, imports of goods used in manufacturing were much higher than imports of consumer goods. This must mean that the plants were not operating at maximum capacity before 1997.

guddo · Answer

Economist: At the insistence of the International Monetary Fund, India slashed import duties from an average of 90 percent in 1991 to 30 percent in 1997. Many feared that the result would be a devastating drop in Indian manufacturing due to competition with imported goods, but the doomsayers were wrong. Manufacturing output increased by 50 percent in that time. The increase was due to the decrease in duties, since, with the decrease, imports of goods used in manufacturing were much higher than imports of consumer goods.

Which of the following, if true, would most strengthen the economist’s argument?

Which of the following, if true, would most strengthen the economist’s argument?

The economist needs support for the causal jump from “duties fell and imports of manufacturing inputs rose” to  “that is why manufacturing output rose.”  The best strengthener ties the higher input imports to a concrete improvement in manufacturers’ ability to produce more.

A. A significant portion of manufacturers in India continued to produce goods from the same raw materials as before 1997 but at much lower cost.

Yes. Lower production cost is exactly what you would expect if cheaper or more available imported inputs followed the duty cuts, and lower cost makes it easier to expand output. This directly supports the economist’s proposed mechanism.

B. Manufacturing increased significantly worldwide after 1992.

No. This suggests a global tailwind that could explain India’s increase without relying on the duty cuts, so it does not strengthen the specific causal claim.

C. Production of goods and services in India was significantly enhanced by an increase in telecommunication infrastructure in the 1990s.

No. This is a plausible alternative cause of higher output, which makes the economist’s “it was the duty cuts” explanation less compelling.

D. Economic growth did not increase everywhere in India in the 1990s and 2000s.

No. Regional unevenness does not help show that lower duties caused the nationwide manufacturing increase.

E. Much of the increase in manufacturing output was of goods for export.

No. Export growth describes where the output went, but it does not connect that growth to cheaper manufacturing inputs from lower duties, which is the economist’s key link.

Answer: (A)

Economist: At the insistence of the International Monetary Fund, India

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

Economist: At the insistence of the International Monetary Fund, India

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards