Q.2:- What were the reasons for putting barriers to foreign trade and foreign investment by the Indian Government? Why did it wish to remove these barriers?
Just after independence in 1947, this step was considered necessary to protect the producers within the country from foreign competition. Only important items such as machinery, fertilizers and petroleum were imported. In 1991, the Government of India liberalized its policy and felt that Indian producers must compete with producers around the world. The government was of the opinion that competition would improve the performance of the local producers within the country since they will be forced to improve their quality. Thus the government wished to remove these barriers.