11: Explain how import substitution can protect domestic industry. What were the bad impacts of IPR,1956?
Dear student,
Under the policy of import substitution imports of those goods that could be produced domestically were discouraged. As a part of the policy imports were subject to various barriers such as tarriffs and quotas. In this way, domestic industries were protected from the foreign competition.
The following were the negative effects of IPR:
Under the policy of import substitution imports of those goods that could be produced domestically were discouraged. As a part of the policy imports were subject to various barriers such as tarriffs and quotas. In this way, domestic industries were protected from the foreign competition.
The following were the negative effects of IPR:
- There emerged monopoly in the private sector which led to inefficiencies and corruption.This affected the performance of the public sector
- Excessive control over the private sector restricted growth
- The policy of import substitution resulted in a shortfall of foreign exchange
- Often it was found that the industrialist misused the licensing policy to restrict competition in the market.
- Over protection from foreign competition meant loss to consumers in terms of choices