Question

India’s neighbouring countries have seen a surge in their imports of the metal. This gold is then being carried across into India by smugglers. Which of the following inferences can best be drawn from the above statements ?

• A. There is a duty differential between India and its neighbouring countries.
• B. The tough restriction on the metal’s imports could be eased
• C. India has a high current account deficit
• D. There has been a sharp depreciation of the rupee

Answer 1

The Correct Option is A

The given situation describes an increase in gold imports by India's neighboring countries and the subsequent smuggling of this gold into India. To deduce the most logical inference, consider the context:

1. Smuggling is typically driven by economic incentives, often due to price differences created by varying tariffs or duties across borders.
2. The statement does not provide evidence or discuss easing restrictions on imports, India’s current account deficit, or the depreciation of the rupee directly influencing smuggling activities.
3. Therefore, the presence of a "duty differential" suggests that importing gold is cheaper in neighboring countries due to lower duties, incentivizing smuggling to benefit from price differences.

Based on this analysis, the most appropriate inference is: There is a duty differential between India and its neighbouring countries.