Explain the concept of import substitution industrialization.

Import substitution industrialization (ISI) is an economic policy that aims to promote domestic industries by substituting imported goods with domestically produced goods. This concept emerged in the mid-20th century as a strategy for developing countries to reduce their dependence on foreign imports and stimulate domestic industrialization.

The main idea behind ISI is to protect and nurture domestic industries by implementing trade barriers such as tariffs, quotas, and import licenses. These measures make imported goods more expensive and less competitive compared to domestically produced goods. By creating a favorable environment for domestic industries, ISI aims to encourage investment, job creation, and technological advancement within the country.

ISI also involves government intervention and support in the form of subsidies, tax incentives, and infrastructure development. The government plays a crucial role in promoting and guiding the growth of specific industries deemed essential for the country's economic development.

The ultimate goal of import substitution industrialization is to achieve self-sufficiency in the production of goods that were previously imported. By reducing reliance on foreign imports, countries implementing ISI aim to strengthen their domestic industries, improve their balance of trade, and foster economic growth.

However, it is important to note that while ISI can initially lead to industrialization and economic growth, it also has its limitations. Over time, it can result in inefficiencies, lack of competitiveness, and dependence on government support. Additionally, protectionist measures can hinder access to foreign markets and limit opportunities for export-led growth.