ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Investment Behaviour, Economies of Scale and Efficiency in an Import-Substituting Regime- A Study of Two Industries

and Efficiency in an Import-Substituting Regime A Study of Two Industries C P Chandrasekhar India's post-independence strategy of import substitution based industrialisation has been subjected to a neoclassical critique from the point of view of efficiency by Bhagwati, Srinivasan, et al The negative aspects like high costs, technological obsolescence and inefficiency are traced to a wide array of controls on trade, capacity creation, production and prices. Votaries of the market mechanism basically arguecapacity creation, etc, have forced sub-optimal decisions on the entrepreneur. There is, as to why controls should necessarily lead to inefficient operation or the adoptionthere is a need for an empirical study of the concrete experience in order to establish that state controls on trade, however, no a priori reason of obsolete techniques. Hence the relation, if any, between controls inefficiency. This paper examines the evidence available in the case of the capital goods and synthetic fibres industry for support of the above mentioned critique of import substitution based industrialisation. It also examines the view that the free play of the market mechanism can do away with the deficiencies of the earlier phase.

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