Consider the following statements regarding the Inverted duty structure:

1. Inverted duty structure is where the import duty on finished goods is low compared to the import duty on raw materials used in producing such finished goods.
2. It encourages domestic manufacturing by making it more competitive against imported finished goods.

The correct statement/s is/are:

Question

Consider the following statements regarding the Inverted duty structure:

1. Inverted duty structure is where the import duty on finished goods is low compared to the import duty on raw materials used in producing such finished goods.

2. It encourages domestic manufacturing by making it more competitive against imported finished goods.

The correct statement/s is/are:

Quintessence Classes · Accepted Answer

The correct answer is 1 only. Analysis of the Statements1. Definition of Inverted Duty Structure (Correct)An Inverted Duty Structure (IDS) occurs when the customs duty (import tax) on raw materials or intermediate components is higher than the duty on the finished product.Example: If importing plastic granules (raw material) costs 10% duty, but importing a finished plastic chair costs only 5% duty, the structure is "inverted."2. Impact on Domestic Manufacturing (Incorrect)An inverted duty structure actually discourages domestic manufacturing.It makes local production more expensive because manufacturers have to pay a high price for inputs.Meanwhile, finished goods from abroad enter the market cheaply.This places domestic industries at a disadvantage, leading to "de-industrialization" or a preference for trading over manufacturing.

Answer

2 only

Answer

Both

Answer

Neither 1 nor 2

Answer & Explanation

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JKPSC JKAS 2023 Prelims

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