What were the reasons for putting barriers on foreign investment by the Indian government? Why did it wish to remove these barriers?


(i) The Indian government after independence had put up barriers to foreign trade and foreign investment. This was considered necessary to protect the producers within the country from foreign countries.

(ii) 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.

(iii) Thus, India allowed imports of only essential items such as machinery, fertilisers, petroleum, etc.


Starting around 1991, some far-reaching changes in policy were made in India :

(i) The government decided that the time had come for Indian producers to compe with producers around the globe.

(ii) It was felt that competition would improve the performance of producers within tl country since they would have to improve their quality.

(iii) 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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