The EU and India in Search of a Partnership
Chapter 3: India’s Engagement with the World Economy
3. India's Engagement with the World Economy 3.1 SOWING THE SEEDS: INDIA'S DEVELOPMENT POLICY India's unique approach I to development, which started in the 1950s and lasted into the I980s, was founded upon a desire for self-reliance; limiting external influences on domestic issues. Three fundamental strategies were the pillars of this approach: I. The import substitution paradigm, popular among developing countries during the 1950s and 60s, underpinned the government's industrialization strategy for the economy. In India's large domestic market, import substitution was far more feasible as economic growth was unlikely to be constrained by market saturation. The unlikelihood of market saturation prolonged import substitution's acceptance as a viable policy in India long after other developing countries had abandoned it. Trade restrictions were the unavoidable consequence of import substitution. Philosophically however, in their commitment to its third 2 option of development, India's government, business community and academics did not shun international interactions per se; it was permissible under certain circumstances. 2. An emphasis on domestically owned, heavy industries producing and supplying the Indian economy with heavy capital goods and the Indian consumer with domestic consumer goods. Therefore, industries producing under import substitution were owned and operated by Indian nationals. Strict limits were placed on foreign ownership (up to 40 per cent maximum) throughout the economy, with an accompanying plethora of regulatory controls. 31 32 Bilateral Trade Agreements in the Era o/Globalization 3. Policies of public sector dominance in infrastructure and essential industries such as electric power, transportation and communications as well...
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