Import substitution
Topic: India's International Trade and Tourism · NCERT: Class 12, Ch 8 "International Trade"
Meaning
Import substitution means making at home the goods a country used to buy from abroad. India followed this policy in the decades after 1947. The aim was to save foreign exchange (the foreign money needed to pay for imports) and to build its own industry. Even so, imports stayed above exports and the balance of payments (the record of all money flowing in and out of a country) stayed adverse.
Example
In the 1950s and 1960s India imported foodgrain, capital goods (machines used to make other goods) and machinery. Under import substitution it tried to make more of these at home. Foodgrain imports ended only after the Green Revolution of the 1970s.
Don't confuse with
- Trade liberalisation: the opposite approach, followed from 1991. It opened India to imports and lowered import duties instead of trying to replace imports.