ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is the Infant-Industry Theory? The infant-industry theory states that new industries in developing countries need protection against competitive pressures until they mature and develop economies of scale that can rival their competitors’.

Detailed explanation-2: -An infant industry can be protected by imposing a production subsidy for domestic production. A production subsidy is a payment made by the government to producers; production is subsidized by the government.

Detailed explanation-3: -(a) Infant industries are newly established industries that are at the developing stage and need protection so that their products can effectively compete with the products of long established international businesses.

Detailed explanation-4: -(b) It is necessary to protect infant industries for the following reasons: (i) In order that the economy can become self-reliant. (ii) To encourage domestic production. (iii) To encourage consumption of locally produced goods.