Q.Briefly explain what is meant by 'import substitution' as followed by India before 1991.

Import substitution meant India tried to manufacture, at home, the goods it would otherwise have had to import, protecting these new domestic industries with high tariffs and strict licensing so foreign competition could not undercut them while they grew.

Import substitution was the dominant economic strategy India followed for roughly the first four decades after Independence (1947 to around 1991). Rather than relying on imported manufactured goods, the government's policy aimed to build up India's own domestic industries to produce those same goods within the country.

To make this possible, the government used a combination of tools: high tariffs (import duties) made foreign goods expensive relative to Indian-made alternatives; strict import licensing controlled which goods could be brought into the country at all; and an extensive system of industrial licensing — popularly known as the 'License Raj' — required government permission before a business could be set up or expanded, which was used partly to protect existing domestic producers from excessive internal competition as well. …

Students sometimes describe import substitution as simply 'banning imports' — it is more accurately building up domestic production capacity as a deliberate substitute for imports, u …