1. The Indian economy was instable and weak after the British left India, and it was important to allow the economy to develop and flourish itself in order to cope up with the high levels of development abroad.
2. Further, industries were coming up in the 1950s and 1960s, and tough competition from imports at that stage would not have allowed these industries to develop. Therefore, the number of imports was strictly regulated by the government for only certain essential items such as machinery, fertilizers, petroleum etc.
3. Therefore, standing at the early stages of development and at the same time recovering from the economic and financial crisis of British rule, Indian economy was not in a position to face foreign competition. The terms and conditions of foreign trade and foreign investment from producers and companies abroad were certainly not suitable to India’s situation at the time of independence.
NOTE – The Indian government after independence had put barriers to foreign trade and investment in order to protect the domestic producers of goods and services from the foreign competition.
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