Consider the following statements about India’s trade policy during the first seven five year plans:
(A) Under import substitution, industries were encouraged to produce in India goods such as vehicles that were earlier imported.
(B) The policy of protection assumed that domestic industries, if protected, would learn to compete in the course of time.
(C) Planners feared that foreign exchange might be spent on imports of luxury goods if imports were not restricted.
(D) Serious thought was given to promoting exports from the First Five Year Plan itself.
(E) Protection from foreign competition enabled indigenous industries to develop in the electronics and automobile sectors.
How many of the above statements are correct?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Four
(A) Under import substitution, industries were encouraged to produce in India goods such as vehicles that were earlier imported. — Correct. Replacing imports with domestic production is import substitution.
(B) The policy of protection assumed that domestic industries, if protected, would learn to compete in the course of time. — Correct. Protected industries were expected to learn to compete over time.
(C) Planners feared that foreign exchange might be spent on imports of luxury goods if imports were not restricted. — Correct. This fear of spending on luxury imports was one reason for restricting imports.
(D) Serious thought was given to promoting exports from the First Five Year Plan itself. — Incorrect. No serious thought was given to exports until the mid-1980s.
(E) Protection from foreign competition enabled indigenous industries to develop in the electronics and automobile sectors. — Correct. Protection let Indian electronics and automobile industries grow.
NCERT (2026-27): “2.5 Trade Policy: Import Substitution … The policy of protection was based on the notion that industries of developing countries were not in a position to compete against the goods produced by more developed economies. It was assumed that if the domestic industries were protected they would learn to compete in the course of time. Our planners also feared the possibility of foreign exchange being spent on import of luxury goods if no restrictions were placed on imports. Nor was any serious thought given to promote exports until the mid-1980s.” “… Protection from foreign competition enabled the development of indigenous industries in the areas of electronics and automobile sectors which otherwise could not have developed.” |