Question

“During the post-independence era till 1990s, India’s inward-looking trade policy was supported by various trade barriers.”

Do you agree with the given statement ? Give valid explanation in support of your answer.

Hint:

Inward-looking policy means import substitution. The government shielded home industry with tariffs (taxes on imports) and quotas (limits on import quantity). So the statement is correct.

Answer 1

Step 1: Understand the statement:
The statement says that India followed an inward-looking trade policy from 1950 to 1990. It also says that trade barriers backed this policy. We must decide if this is correct and give reasons.

Step 2: Meaning of an inward-looking trade policy:
An inward-looking policy is also called import substitution. Under it, the country makes at home the goods it earlier bought from abroad. The aim was to cut imports and to build local industry.

Step 3: How the policy was protected:
New Indian industries were weak and could not face foreign firms. So the government shielded them from foreign competition. It did this by using trade barriers. The two main barriers were tariffs and quotas.

Step 4: Tariffs:
A tariff is a tax on imported goods. It makes the imported good dearer in the home market. So buyers use less of it and prefer the home-made good.

Step 5: Quotas:
A quota fixes the maximum quantity of a good that can be imported. Once the limit is reached, no more of that good can come in. This also keeps foreign goods out of the market.

Step 6: Conclusion on the statement:
Tariffs and quotas together worked as trade barriers. They made import substitution possible. So the given statement is correct.

Final Answer:
Yes, I agree. India used import substitution and shielded home industry with tariffs and quotas.