Import substitution policy versus export led growth strategy

The idea behind IS policies was that, developing economies would grow faster if they forced their economies to expand their industrial sectors and that faster growth was well worth the short- run cost of lost international trade.

This in turn leads the country that applies IS strategy to borrow money in order to finance the trade deficit. Basically, small countries, as they have small area, small population and small markets, can get larger scale economy profit by using export orientated strategy.

But an EP strategy can be successful only via government support. In some cases, the inefficiencies were so great that the value of the imported inputs was higher than the volume of output at international prices.

Export-oriented industrialization

This is true of many economies aiming to exploit their comparative advantage in primary commodities as they have a long term trend of declining prices, noted in the Singer-Prebisch thesis [12] though there are criticisms of this thesis as practical contradictions have occurred.

This may not be undesirable in itself, but it would require larger inflows of external capital in the next few years and this is not available on appropriate terms.

From Import Substitution to Export-Led Growth Import substitution, far from being a deliberate development strategy, became a dominant strategy in the wake of the U.

Target Plus Scheme to promote exports: Actually, the advantages of an export-led growth strategy are accepted by most people: Our tutor gave us highest mark in the class. Foreign trade enables the transmission of technical know how, skills, managerial talents to the developing countries.

To facilitate duty-free import of samples by exporters, number of samples or pieces has been increased from the existing 15 to Secondly, import substitution strategy will create the necessary conditions to develop the strategic industries and achieve industrialisation.

In addition, successful exporters often enjoy external benefits in the form of special preference for the use of port facilities, communication networks, and lower loan and tax rates. Having decided to industrialise, the developing nations had to choose between industrialisation through import substitution and export-oriented industrialisation.

China renmin university press. Further, the thrust on promotion of agri-products would lead to substantial foreign exchange earnings as well as employment generation. Protection had been granted at times by using the infant-industry argument — the argument that new industries had to be protected until they could establish themselves properly to meet the competition.

It has been realised that SEZs have not realised their full potential.

Import Substitution Industrialization (ISI)

Is the export promotion strategy best one, or does it have any alternative except the import substitution? The main point of an EP strategy is to make production for international trade and hence to increase exports. It should be noted, as well, that import substitution does not mean import elimination: Basic customs duty on plant and machinery imported for setting up or substantial expansion of iron ore pellet plants or iron are beneficiation plants reduced from 7.

These policies involve government targeting of sectors in which the country has potential comparative advantage. Duty-free import of capital goods for use in production for exports: An import substitution industrialisation ISI strategy has three main advantages: Foreign trade also promotes economic growth of a country.

This strategy is consistent with the strategies of protecting some strategic industries and realising the industrialisation in developing countries Chunling Yang.

No existing export-promotion scheme has been withdrawn. However, it is worth mentioning that exchange rate though determined by demand for and supply of foreign exchange can be influenced by RBI through buying and selling of dollars or other foreign currencies. By the s, a number of developing nations that had earlier been following import substitution strategies were now beginning to liberalize trade, adopting the export-oriented model instead.Import substitution industrialization (ISI) Trade Policy, Exports and Growth in European Countries.

Even though ISI is a development theory, Prebisch had experience running his country’s central bank and started to question the model of export-led growth.

Import substitution as economic development by Avik Basu [email protected]> last updated. Friday, April 15, AM Growth and development are often uttered in the same breath and yet the goals of each are actually quite different. Opposite to the IS strategy, EP is a trade and economic policy aiming to speed-up the industrialization process of a country through exporting goods for which the nation has a comparative advantage.

Export-led growth implies opening domestic markets to foreign competition in exchange for market access in other countries. Import Substitution. A discussion and analysis of Import Substitution Strategy and Export-led Growth Strategy, looking at the Chinese economy.

A discussion and analysis of Import Substitution Strategy and Export-led Growth Strategy, looking at the Chinese economy. reduce the dependence on foreign trade and implement foreign trade policy with both the import.

The export orientation of trade policy (or outward-looking growth strategy) is believed to have many advantages and is regarded as superior to import-substitution policy. We explain some of these advantages below.

The Countries conduct two different strategies for industrialization; import substitution and export promotion for their international trade.

Whether to adopt import substitution or export promotion trade strategy is controversial issue throughout the years for the countries. This issue forms a.

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Import substitution policy versus export led growth strategy
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