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SAI INTERNATIONAL SCHOOL
                                               SESSION 2020-21
                                                     CLASS-X

              ECONOMICS- Ch-4- GLOBALISATION AND THE INDIAN ECONOMY
                                                LESSON NOTES
                                                  SUB-TOPIC- 5
                   Liberalisation of foreign trade and foreign investment policy


           Liberalisation of Foreign Trade and Foreign Investment Policy
           Trade barriers

                 Trade barriers are some restrictions that have been set up by governments. *
                 The government can use trade barriers to increase or decrease (regulate) foreign
                  trade and to decide what kinds of goods and how much of each, should come into
                  the country.
                 Tax on imports is an example of trade barrier.




           Necessity of Trade Barriers

                 The Indian government, after Independence, had put barriers to foreign trade and
                  foreign investment.
                 This was considered necessary to protect the producers within the country  from
                  foreign competition.
                 Industries were just coming up in the 1950s and 1960s, and competition from
                  imports at that stage would not have allowed these industries to come up.
                 Thus, India allowed imports of only essential items such as machinery, fertilisers,
                  petroleum etc.
                 Note that all developed countries, during the early stages of development, have
                  given protection to domestic producers through a variety of means.


           Removal of Trade Barriers

                 Starting around 1991, some far reaching changes in policy were made in India.
                 The government decided that the time had come for Indian producers to compete
                  with producers around the globe.
                 It felt that competition would improve the performance of producers within the
                  country since they would have to improve their quality.
                 This decision was supported by powerful international organisations.
                 Thus, barriers on foreign trade and foreign investment were removed to a large
                  extent.
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