Question

Indian producers were protected against foreign competition which did not give them the incentive to improve the quality of goods that they produced. Identify the policy referred to :

(Choose the correct option)

• A. Industrial Policy Resolution, 1948
• B. Policy to promote small-scale industries
• C. Import substitution policy
• D. Licencing policy

Hint:

Protection from foreign goods through tariffs and quotas is import substitution. It reduced the push to improve quality.

Answer 1

The Correct Option is C

Step 1: Read the clue:
The clue says producers were shielded from foreign competition. So they had no push to improve quality.

Step 2: Recall the policy:
Under import substitution, India raised tariffs and set quotas on imports. The aim was to produce at home what had been imported.
Domestic firms had no rival from abroad, so they lacked the urge to improve quality.

Step 3: Check the options:
(A) Industrial Policy Resolution 1948 set up a mixed economy and the role of the state. It is not about import protection, so (A) is wrong.
(B) The policy for small scale industries reserved items for small units. It is about reservation, not foreign competition, so (B) is wrong.
(C) Import substitution matches the clue, so (C) is correct.
(D) Licensing needed permits to start or expand a firm. It controls entry, not imports, so (D) is wrong.

Step 4: Result of the policy:
Indian goods stayed costly and of poor quality for many years.
This was one reason why the 1991 reforms opened the economy to trade.

Final Answer:
The policy is import substitution. Option (C).