The External Sector

Abstract

India’s historic policy of ‘self reliance’ discouraged the development of exports as a means of growth. The nation’s resources were to be mobilised in building domestic industrial capability. The usual reason for protecting any industry is to improve the terms of trade. In India, it was the scarcity of foreign exchange that dictated a protectionist stance. It had an adverse effect on resource allocation resulting in a trade policy that was not developed in conjunction with the country’s fiscal and industrial policy.