Export Promotion

INTRODUCTION:
Countries that aspire for economics development

through foreign trade applies two important measures:
 EXPORT PROMOTION
 IMPORT SUBSTITUTION
MEANING OF EXPORT
PROMOTION:
It refers to the policy of the government designed to encourage the
exporters to export more goods from the country than before. To
achieve this end, several incentives are given to them, viz.
1.Cash subsidies
2. Bank loan at cheap rate of interest
3.Facilities are provided to import machinery and raw material
4.Concessional freight rates are charged by railways and shipping
companies on the goods exported
5.Tax concessions are given to the export
6.Certain percentage of export earnings are permitted to be
utilized for the import of machines and raw materials needed by
exporters.
FORMS OF EXPORT PROMOTION
 Export promotion of  Export of manufactured
primary products products.
BENEFITS OF EXPORT PROMOTION
1. Trade helps in breaking vicious circle of poverty
2. Inducement to invest
3. Expansion in the extent of the market
4. Technical progress
5. Efficient use of means of production
6. Import of capital goods and export of primary goods
7. Basis of import of foreign capital
8. Healthy competition
HARMFUL EFFECTS OF FOREIGN
TRADE ON DEVELOPMENT
 Lopsided development
 Limited possibility of gain
 Adverse effects of foreign capital
 Adverse effect of demonstration effect on investment
 Secular deterioration in the term of trade
OBSTACLES IN THE WAY OF
EXPORT PROMOTION
o Foreign competition
o High prices
o Substitutes
o Low quality
o Tariff policies
o Limited market
o Lack of publicity
SUGGESTION FOR EXPORT
PROMOTION STRATEGY
 Proper management of information
 Export sector should be declare priority sector
 Control room for exports
 Product planning for exports
 Training for export marketing
 State trading
 Cost benefit analysis
 Joint ventures abroad
 Foreign collaboration
 Multilateral and bilateral agreement
 Encouragement to tourist trade
 Tax concession
 Special export schemes
Import Substitution Means, “Total Or Partial Replacement
Of An Imported Product Of The Same Functional
Requirement Mainly From Indigenous Material And Know-
how.”
Acc. To M.P.TODARO, “Import substitution entails an
attempts to replace commodities usually manufactured
goods formerly imported with domestic source of
production.”
KINDS OF IMPORT SUSTITUTION
 SIMPLE SUBSTITUTION:  ALTERNATIVE
In this case, almost an SUBSTITUTION:
imitation of import good is In this case, the substitutes
sought to be produced in produced indigenously
the country. There is very vary in shape and function
little variation in shape and from the imported
functioning from the product. But its working is
import good. more or less the same.
Example: production of Example: use of copper
cycle, food grain, etc. tubes in sugar making
machine, etc.
STAGES OF IMPORT SUBSTITUTION
 First Stage: It entails the replacement of the imports of
non-durable consumer goods, such as clothing , shoes, and
household goods, and of their inputs such as textile fabrics,
leather and wood, by domestic production, since these
commodities suit the combination existing in developing
countries that are at the beginning of industrialization
process.
 Second Stage: in this the underdeveloped countries expand
their manufacturing industries oriented towards domestic
markets. This purpose is said to be served by industrial
protection that is said to bring additional benefits through
improvements in terms of trade.
NEED OF IMPORT SUSTITUTION
1) Unfavorable balance of trade.
2) Devaluation of rupee.
3) Shortage of foreign exchange.
4) Declining foreign aid.
5) India mostly imports food grain, petroleum,
fertilizers, machinery, metals and chemical products.
6) Developing nations has been experiencing the
shortage of many important goods like petrol,
fertilizers, etc.
OBJECTIVES OF IMPORT
SUBSTITUTION POLICY
a. Import of raw material, spare part, etc. should be
substitute by domestic products.
b. Reduction of import components in each unit of
domestic output.
c. Production of chemical goods by domestically
produced raw material.
d. To explore alternatives of imported goods and seek
their production.
e. To increase the domestic production of such
imported items as food grains, etc. so that
dependence on imports is minimized.
METOD OF IMPORT
SUBTITUTION
 Tariff policy.
 Increase in production.
 Research.
 Swadeshi spirit.
EVALUATION OF IMPORT
SUSTITUTION POLICY
 According to Dr. Manmohan Singh, “Along with the control on
the import of non-essential goods, their domestic production
should also be encouraged.”
 According to Prof.Padma Desai, “as an instrument of
development of an underdeveloped economy, policy of import
substitution seems to be unable to generate any fundamental
change in economy.”
 In short, Prof. Helleiner has rightly summed up that; “It is
difficult to find any rationale for the pattern of import
substitution industrialization which has, whether consciously or
not, actually been promoted. It has given undue emphasis to
consumer goods in most countries. It has given insufficient
attention to potential long run comparative advantages; and it
has employed alien and unsuitable capital intensive technology
to an extraordinary unnecessary degree.”
SUGGESTIONS:
 Import substitution should be in respect of the
production of those goods which are incidental to
industrialization, such as, steel, news print, etc.
 Allocation of investment for import substitution
should be in favour of primary industries.
 Public and private sectors should co-operate with each
other for success of import substitution.
 Assistance of foreign capital should be sought to
establish import substitution industries.
CONCLUSION:
According to Krueger, “Experience has been that growth performance which has
been more satisfactory under export promotion strategies than under import substitution
strategies. While it is impossible to specify a particular model of growth process that will be
simultaneously satisfy all observers, the relation ship between export performance and
growth is sufficiently strong that it seems to beer up under many different specifications of
the relationship.”

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INTRODUCTION:

Countries that aspire for economics development

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