CBSE 2025, Set 1

Question

(b) (i) "Import substitution policy, if not applied carefully, can prove to be a double-edged sword for any economy."
Do you agree with the given statement? Justify your answer with valid arguments.

(ii) Distinguish between stabilising measures and structural measures, as taken up by the Government of India in 1991.

Edvaya · Accepted Answer

The correct answer is Subjective. **(i)** Yes. Import-substitution policy aimed at replacing imports with domestic production to protect domestic industries from foreign competition and to save foreign exchange.
However, protection from foreign competition may do more harm than good. The domestic producers in the absence of a competitive market won't have any incentive to improve the quality of their goods. In turn, consumers may have to purchase low quality items at a higher price. Hence, import substitution policy, if not applied carefully, can prove to be a double-edged sword for any economy.

**(ii)** Stabilisation measures are short-term measures, intended to correct some of the weaknesses that have developed in the balance of payments and to bring inflation under control.
Whereas;
Structural measures are long-term measures, aimed at improving the efficiency of the economy and increasing its international competitiveness by removing the rigidities in various segments of the Indian economy.

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Economics > Indian Economic Development > Economic Reforms 1991

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