The import-substitution industrialization (ISI) strategy was a key component of India’s economic policy in the early decades following independence. Here’s an evaluation of the successes and limitations of the ISI strategy:

Successes:

1. Rapid Industrialization: The ISI strategy led to rapid industrialization in India, with the country’s industrial output growing at an average rate of 8% per annum during the 1950s and 1960s.
2. Self-Sufficiency: The strategy helped India achieve self-sufficiency in many industries, such as textiles, steel, and automobiles.
3. Job Creation: The ISI strategy created a large number of jobs in the manufacturing sector, helping to reduce unemployment.
4. Domestic Capital Formation: The strategy encouraged domestic capital formation, with the government investing heavily in infrastructure and public sector enterprises.

Limitations:

1. Over-Dependence on Public Sector: The ISI strategy over-emphasized the role of the public sector, leading to a lack of competition and inefficiencies in many industries.
2. Lack of Competition: The protectionist policies implemented under the ISI strategy created a lack of competition, which hindered innovation and efficiency.
3. Import Dependence: Despite the name “import-substitution”, India remained heavily dependent on imports, particularly in sectors like oil and machinery.
4. Inefficient Allocation of Resources: The government’s direct control over resources led to inefficient allocation, with many resources being wasted on unviable projects.
5. Inflation: The ISI strategy led to high inflation rates, as the government’s expansionary policies fueled demand for goods and services.
6. Limited Growth: The growth rate of the Indian economy was limited by the ISI strategy, which failed to create a sustainable and competitive economy.
7. Trade Deficits: The strategy led to large trade deficits, as India imported more goods than it exported.