Import Substitution Induatrialization: Indian Emphasis

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From the second half of the nineteenth century, the idea that tariff autonomy could be used to reinforce a process of state-led late industrialization became known to economists and politicians. India started from a free-trader position in the nineteenth century, no doubt owing to its status as a colony of Britain. If India was a case of free trade with little state intervention, imperial Russia and Japan were examples of free trade with significant state intervention, and Brazil, Mexico, and Argentina, cases of significant protection from mid-to-late-nineteenth century. [2]

The colonial ISI in India shows the formation of colonial ISI; import substitution in government purchases, which was the earliest field of application of colonial ISI; and tariff policy. In each case, we see concern over a trade-off between efficiency and protection influence the operation of ISI, Discriminating protection, and nationalist transformation of ISI.

Finally, the changing discourse of ISI in India between 1920 and 1940, which transformed a colonial efficiency-constrained protectionist industrialization policy into an entitlement for indigenous capitalists and an instrument to serve the ‘national interest’[3]. In the process, discriminating protection changed into indiscriminate protection. Their interests conflicted with the interests of trading firms, who had campaigned to free government purchase from a buy-British bias, and thus served ISI in a manner that protected the interests of foreign capital in India. I think the reason for these were the voice of trading firms and foreign capital was weak. Also, the design of the postcolonial ISI is held responsible for the failing. Politicians and economists desiring to industrialize quickly designed the policy. Their intention was right; their method was wrong. I suggest that the intention was wrong too. The disregard for productivity and efficiency stemmed from a political battle fought in the 1930s and 1940s, from which a small section of the Indian capitalist class emerged as winners, at the expense of a larger section consisting of traders and foreign investors who relied on the open economy to do business.

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