What do you understand by import substitution? To what extent, the Make in India initiative is similar to or different from the import-substitution strategy? Explain.

Import substitution is an economic and trade policy which advocates replacing foreign goods with domestic goods. In earlier times it was undertaken by countries in nascent stages of industrialization to protect their industries from foreign competition. Countries undertake import substitution to generate income and employment for their residents, become self sufficient. India had adopted the policy of import substitution post independence till Economic reforms in 1991 by imposing heavy tariffs on import.
The government of India has launched “Make in India” campaign to boost manufacturing by increasing output from the present level of about 16% of the gross domestic product (GDP) to 25% by 2022. Expansion in the manufacturing sector will create employment opportunities and become a major growth driver.
Make in India has been viewed as Import Substitution strategy as it stresses on production in India. Manufacturing within the country would reduce imports and help country develop capabilities to meet its needs. It would help generate employment.
Make in India is not an Import substitution strategy because:

  • Aim of Make in India is to make Indian manufactured goods globally competitive by harnessing demographic dividend.
  • Government is not pursuing a protectionist policy in trade and is rather advocating open flow of goods, services and professionals.
  • Many sectors have been opened to foreign investment by raising FDI limits, abolishing FIPB etc.

Thus Import Substitution and Make in India have common objectives of generating employment, driving economic growth but adopt different means to achieve it.


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