Give criticism of import substitute strategy.

Solution

Import substitute strategy is criticised on the following grounds:

1. Growth of inefficient monopolies : Protection gave birth to inefficient monopoly in public sector. An example is the provision of telecommunication service. This industry continued to be reserved for public sector even after it was realised that private sector firms could also provide it. Due to absence of competition, even till the late 1990's, one had to want for a long time to get a telephone connection. Now with competition, the situation has changed. In new situation, we get many SMS for getting phone connection free of cost.

2. No incentive for improvement : In the name of self-reliance, our products were protected against foreign competition and thus did not give them the incentive to improve the quality of goods they produced. Due to restrictions, on imports, the Indian consumers had to purchase whatever the Indian producers produced. The producers were aware that they had a captive market, so they had no incentive to improve the quality of their goods.

3. Failed to develop a strong export: As our goods were of inferior quality, so we could not compete with other countries and could not develop a strong export.
4. Misuse of licence : Licence was misused by big industrialists.

Some More Questions From Indian Economy 1950-1990 Chapter

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Indian Economy 1950-1990

Give criticism of import substitute strategy.

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