5 Main Reasons for Protection of Under-Developed Countries

The following points highlight the five main reasons for the protection of under-developed countries.

The reasons are: 1. Fullest Utilisation of Natural Resources 2. Protection Encourages Investment 3. Diversification is Needed 4. Protection of Infant Industries is Necessity 5. Infant Economy ‘Argument’ given by Prof. Crunnar Myrdal is Support of Protective.

Reason # 1. Fullest Utilisation of Natural Resources:

Protection will bring about a fuller utilisation of unutilized or under-utilised natural resources.

Reason # 2. Protection Encourages Investment:

Protection will encourage investment and will give employment and will increase income because of restriction on imports. It will create demand for home products.

Reason # 3. Diversification is Needed:

India is an under-developed country and people are very much dependent on agriculture. Diversification is very much required in this country. Protection helps to bring about diversification in industries and this gives economic stability to them.

Reason # 4. Protection of Infant Industries is Necessity:

Protection of infant industries is an absolute necessity in country like India which is rich in natural resources. India possesses vast potentials for industrial growth. But because of high competition from other countries Indian industries could not make rapid progress. Therefore, economists have written that providing protective umbrella to infant industries assumes a special significance in country like India.

Reason # 5. Infant Economy ‘Argument’ given by Prof. Crunnar Myrdal is Support of Protective:

Prof. Myrdal has written four special reasons for industrial protection of promote industrialization.

They are:

(a) The difficulties of finding demand to match new supply,

(b) The existence of surplus labour,

(c) The large rewards of individual investments in creating external economics,

(d) Lop sided internal price structure dis-favouring industry.

Conclusion:

While concluding the study of protection it can be said that protection cannot be a permanent feature of any industry. It can serve only a temporary expedient to help industrial growth. Protection can be granted only to selected industries which have a bright future and which are essential to the country for strategic and other reasons. It should also be remembered that when the protected industries have sufficiently developed, the protection given to them be withdrawn.

Protection cannot be considered as a Panacea for all industrial ills. It is after all a sort of negative support. It has got limitations of its own. It simply helps in eliminating foreign competition. It cannot create and establish industry unless other conditions are favourable and unless other necessary assistance is given as per situation.