What was the main objective of India's 'Import Substitution Policy' adopted post-independence?
Show answer & explanation
Correct answer: C
Explanation
Solution: The correct answer is To protect domestic industries from foreign competition.
Explanation:
☛ After independence, India adopted an inward-looking trade strategy officially known as Import Substitution Industrialization (ISI).
☛ The main objective was to replace foreign imports with domestic production, thereby encouraging self-reliance (Atmanirbharta).
☛ This policy aimed to protect infant domestic industries from foreign competition, as nascent Indian industries were not technologically advanced enough to compete globally.
☛ The protection was enforced primarily through two instruments: tariffs (taxes on imported goods) and quotas (specifying the quantity of goods that could be imported).
Extra Exam-Relevant Facts:
☛ Second Five-Year Plan (1956–1961): Based on the Mahalanobis Model, it laid heavy emphasis on developing heavy industries and basic infrastructure using the import substitution strategy.
☛ Industrial Policy Resolution (IPR) 1956: Classified industries into three categories (Schedule A, B, and C) and gave the public sector the leading role in industrial development.
☛ License-Permit Raj: Under this regulatory regime, setting up a new industry or expanding capacity required government licenses, which restricted free enterprise.
☛ Economic Crisis of 1991: Excessive protectionism, inefficiencies in PSUs, and severe balance of payments (BoP) crisis led India to replace import substitution with the LPG (Liberalisation, Privatisation, and Globalisation) reforms.
Important One-Liners for Upcoming Exams:
☛ Which Five-Year Plan in India strongly emphasized import substitution for heavy industries? → Second Five-Year Plan
☛ What term describes the quantitative restriction placed on imports during the pre-1991 era? → Import Quota
☛ Who was the primary architect of India's Second Five-Year Plan strategy? → P.C. Mahalanobis
☛ In which year was the landmark New Economic Policy (LPG) introduced in India? → 1991
☛ Under which Industrial Policy Resolution was the principle of state reservation in heavy industry established? → Industrial Policy Resolution (IPR) 1956