Which is better export promotion or import substitution?

Export promotion like import substitution has great influence in a country’s foreign exchange reserves. But unlike in the import substitution where the existing reserve is saved, in export promotion the foreign exchange reserve increase due to increase in the amount of international trade being undertaken.

What are import and export substitution policies?

ISI targets the protection and incubation of newly formed domestic industries to fully develop sectors so the goods produced are competitive with imported goods. Developing countries began to reject ISI policy in the 1980s and 1990s.

What is the role of export promotion and import substituting policies in the balance of payments of a country?

In order to succeed government of India has changed her EXIM policy from time to time to attain export promotion policy. Export promotion and import substitution are the two important measures for narrowing down and ultimately wiping out the balance of payments deficit.

What is export substitution policy?

Export-oriented industrialization (EOI) sometimes called export substitution industrialization (ESI), export led industrialization (ELI) or export-led growth is a trade and economic policy aiming to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage.

What are the disadvantages of import substitution?

The disadvantages of import substitution industrialization (ISI)

  • less competition –> no comparative advantage or specialization.
  • inefficiency since product could be imported from more efficient foreign producers.

What is another name of import substitution policy?

Import substitution industrialization (ISI) is a trade and economic policy that advocates replacing foreign imports with domestic production.

What is the advantage of a policy of import substitution?

Import substitution is popular in economies with a large domestic market. For large economies, promoting local industries provided several advantages: employment creation, import reduction, and saving in foreign currency that reduced the pressure on foreign reserves.

What are the advantages of export promotion?


  • Export promotion leads to expansion of goods for the foreign market.
  • Export promotion industries have a wide market for their produce for both domestic and foreign markets.
  • Exporting products boosts the local economy and helps local businesses increase their revenue.

Why import substitution is bad?

Import substitution can impede growth through poor allocation of resources, and its effect on exchange rates harms exports.

What is the benefit of import substitution?

What are disadvantages of import substitution?

On the other hand, import substitution brought the following disadvantages : Gradual general increase in prices , the result of the unexpected rise in consumption. Emergence of monopolies and state oligopolies , depending on who accessed the incentives and benefits. State intervention weakened the natural mechanisms of market self-regulation .

What are the objectives of import substitution?

The main objectives of the policy of import substitution in Latin America and Southeast Asia were industrialization and catching the economically developed countries . Currently in the countries with transitive economy the import substitution policy aims to improve the trade balance and reduce imports.

What is an import substitution strategy?

Import substitution. A strategy that emphasizes the replacement of imports with domestically produced goods, rather than the production of goods for export, to encourage the development of domestic industry.

What is the meaning of import substitution?

Import substitution is a strategy under trade policy that abolishes the import of foreign products and encourages for the production in the domestic market. The purpose of this policy is to change the economic structure of the country by replacing foreign goods with domestic goods.