Appropriate Tools for Implementing an ISI Strategy:

Important policy  issues  in  implementing  the  ISI strategy  were what instruments to use and who was to be responsible for investment? Countries tended  to adopt quantitative restrictions (QRs) to curtail imports. This  was  because  QRs were believed  to provide more certain signals to prospective investors  in the  protected  industries.  The  impact  of  tariff protection could be uncertain as prices might fluctuate. (You should revise the discussion of  tariffs and quotas to help you understand this point.

Furthermore,  most  countries  adopted an  import substitution strategy in consumer goods industries, with the private sector playing the leading role in undertaking investments. It was believed that stoppage of consumer goods imports would lead  the  transnational corporations  (TNCs) who were  supplying the imported goods fiom abroad to undertake  the production of similar goods in the developing country itself,  thereby solving  the problems of adequacy of investible  funds, technology transfer and of shortages of entrepreneurship.

A  few countries, mainly India,  also undertook import substitution in capital goods  industries under  the  aegis of the  state..  such state sponsored industrialisation raised more complex issues of generating sufficient  investible funds as well as getting the technology to establish  the plants to produce the capital goods.