Explanation:

? The industrial policy that we adopted was closely related to the trade policy. In the first seven five year plans, trade was characterized by what is commonly called an inward-looking trade strategy. Technically, this strategy is called import substitution.
? This policy aimed at replacing or substituting imports with domestic production. For example, instead of importing vehicles made in a foreign country, industries would be encouraged to produce them in India itself. Hence option 2 is correct.
? In this policy, the government protected the domestic industries from foreign competition. Protection from imports took two forms: tariffs and quotas.
? Tariffs are a tax on imported goods; they make imported goods more expensive and discourage their use. Quotas specify the quantity of goods which can be imported. The effect of tariffs and quotas is that they restrict imports and, therefore, protect domestic firms from foreign competition. Hence option 1 is correct.
? Increasing the proportion of Indian goods in the export market was not the aim of the Import Substitution policy. Hence option 3 is not correct.