"Import substitution created capacity but not competitiveness." Critically examine this with reference to India's public-sector consumer-goods enterprises before 1991.

Before 1991, India's planned economy relied on import substitution, which means making at home what was earlier imported. Tariffs, licensing and public ownership protected these industries. HMT's watch business is the classic test case among consumer-goods PSUs. It largely bears out the statement, but not entirely.

Capacity created: the first half holds

• Value-chain ambition: HMT learnt watch-making through Japanese collaboration. A 1976 plan then sought Swiss help for a three-phase ladder: assembly → component machinery → machines built in India. Its goal was "near self-sufficiency both in design and production" [1].
• Scale for mass demand: demand was projected at 10 million watches a year by 1980 [1]. HMT grew into the "Time keepers of India" [2][3].
• Human capital: a proposed Horological Institute would train Indian staff alongside production [1].
• Forex saving: making watches at home saved scarce foreign exchange.

Competitiveness not created: the second half

• Borrowed, not absorbed, technology: about 15 years after the Japanese tie-up, design capability still depended on a new foreign partner. The whole programme hinged on "if an agreement is reached" with Swiss industry [1].
• Protection masked inefficiency: HMT Watches made losses every year from 1993 [2][3]. That was barely two years after the 1991 reforms opened the market.
• Soft budget constraint: the CCEA approved closure only on 6 January 2016. Closing three HMT subsidiaries needed ₹427.48 crore, with VRS/VSS at 2007 pay scales [4].
• No exit test: success was measured by output, not by market performance, so decline went unchecked.

Where the statement overreaches

• Capacity was not wasted: the skills, brand and consumer trust were real assets. The failure lay in keeping protection unchanged for decades, not in the 1976 choice itself.
• The problem was governance: PSU structures had no mechanism for timely exit. Holding-PSU Boards can now recommend the closure of loss-making subsidiaries [5]. That remedy came long after HMT's losses began.

In sum, import substitution built factories, skills and brands. Without competitive pressure and indigenous R&D, it did not build firms that could survive open markets. Today's Atmanirbhar Bharat and PLI schemes reward actual output. They should also set design and export targets and time-bound exits. Then self-reliance would rest on competitiveness, in line with SDG 9's call for innovative, sustainable industrialisation.