class-3
- TRADE POLICY: IMPORT SUBSTITUTION
India’s industrial policy was related to trade policy because: India adopted import substitution (substituting imports[ex. vehicles] with domestic production) policy.
government protected the domestic industries from foreign competition in two forms:
- Tariffs: tax on imported goods;
- Quotas: specified the quantity of goods which can be imported.
Que. Why the policy of protection by govt.?
- industries of developing countries were not in a position to compete against the goods produced by more developed economies.
- To save foreign exchange.
EFFECT OF POLICIES ON INDUSTRIAL DEVELOPMENT (during first 7 plans)
- proportion of GDP contributed by the industrial sector + (1950-51: 13% to 1990-91:24.6%); indicator of development
- 6% annual growth of industrial sector.
- Diversification, Indian industry not restricted to cotton textiles and jute now due to public sector.
- Poor people could start business with less capital through SSI.
- development of indigenous industries (electronics and automobile) because Protection from foreign competition.
- Many public sector enterprises could not perform batter so criticized.
- Relevance of state enterprises now changes as private sector firms could also provide for fair competition.
- some scholars to argue: state should get out of areas which the private sector can manage so that state should get out of areas which the private sector can manage