Trade barrier means restrictions imposed on import and export of goods. It is called so because some restrictions have been set up. The trade barriers provide protection to domestic goods from foreign competition. The government can use barriers to increase or decrease (regulate) foreign trade and to decide what kind of goods and services and how much of each should come into the country.
Reasons for putting barriers to foreign trade and foreign investment by the Indian Government were:
(i) To protect the domestic producers within the country from foreign competition.
(ii) The competition from importers would have crippled the new-born industries of India. In such a situation, imports of only such commodities were allowed which were quite necessary such as machinery, fertilisers, petroleum etc.
(iii) During 1950s and 1960s, competition from imports was giving a death blow to growing industries in India. Hence, India allowed imports of only essential goods.
