Step 1: Parse the decision scope.
The decision is about encouraging exports} despite domestic scarcity. A strong argument must address macroeconomic needs (e.g., foreign exchange, trade balance) or feasibility (e.g., selective exports/services) rather than make absolute claims.
Step 2: Evaluate Argument I.
Earning foreign exchange is a core macroeconomic requirement to fund essential imports (energy, technology, medicines). Export promotion even during domestic scarcity} can still be justified by:
(i) exporting non-scarce items/services (IT, tourism, specialized goods),
(ii) improving BoP and enabling purchases that relieve domestic constraints.
It is relevant, fact-based, and policy-grounded $$ strong.
Step 3: Evaluate Argument II.
Claim: “Even selective encouragement would lead to shortages.” This is overly general and assumes any export push inevitably reduces domestic availability. Selective policies can exclude scarce items, use quotas, or focus on services—so the inevitability claim is unsupported $$ weak.
Step 4: Decision.
Only Argument I qualifies as strong; Argument II is weak. Therefore, option A.
\[
\boxed{\text{(A) Only argument I is strong}}
\]