Practice Questions

<h3 style="color: rgb(255,255,255);">Import Substitution Strategy in India</h3><ul style="color: rgb(255,255,255);"><li>Historical Context: Following Independence, the Indian government adopted a strategy of Import Substitution Industrialization (ISI). This was prominently featured in the Second Five-Year Plan (1956–1961), also known as the Mahalanobis Model, which prioritized the development of heavy industries.</li><li>Core Mechanism: Import substitution involves replacing foreign imports with domestic production. The government aimed to achieve self-reliance (Atmanirbhar) by manufacturing essential goods within India rather than relying on external markets.</li><li>Protective Measures: To shield fledgling domestic industries from the superior efficiency and scale of established foreign competitors, the government implemented several barriers:<ul style="color: rgb(255,255,255);"><li>High Tariffs: Increased import duties made foreign goods significantly more expensive.</li><li>Quotas: Direct physical limits were placed on the quantity of imports allowed for specific goods.</li><li>Licensing: A strict industrial licensing system (the License Raj) required businesses to obtain government approval to expand capacity or diversify production, further controlling the competitive landscape.</li></ul></li><li>Objectives: The primary goal was to save foreign exchange reserves, reduce dependency on developed nations, and stimulate rapid industrialization by creating a captive market for domestic producers.</li><li>Critique: While this policy fostered an indigenous industrial base, it is often criticized for leading to inefficiencies, poor product quality due to lack of competition, and a focus on production quantity over technological innovation. This policy regime largely continued until the economic reforms of 1991, which shifted India toward liberalization and globalization.</li></ul>

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

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