Why is ‘tax’ on imports known as a trade barrier? Why did the Indian government impose barriers to foreign trade and foreign investments after independence? Give three reasons.
TAX on import is known as a trade barrier, because some restriction has been set up. The government can use a trade barrier to increase or decrease foreign trade and to decide what kinds of goods and how much of each should come into the country.
- The Indian government after independence had put barriers to foreign trade and foreign investment.
- This was considered necessary to protect the producers -within the country from foreign competition.
- Industries were just coming up in the 1950s and 1960s.
- Competition from imports at that stage would not have allowed these industries to develop and grow.
- India allowed imports of only essential items such as machinery, fertilizers, petroleum etc.