1. EXPORT PROMOTION AND IMPORT SUBSTITUTION STRATEGY

2. INTRODUCTION: Countries that aspire for economics development through foreign trade applies two important measures:
EXPORT PROMOTION
IMPORT SUBSTITUTION

3. 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 Cash subsidies Bank loan at cheap rate of interest Facilities are provided to import machinery and raw material 4.Concessional freight rates are charged by railways and shipping companies on the goods exported Tax concessions are given to the export Certain percentage of export earnings are permitted to be utilized for the import of machines and raw materials needed by exporters.

4. FORMS OF EXPORT PROMOTION
Export promotion of primary products
Export of manufactured products.

5. BENEFITS OF EXPORT PROMOTION
Trade helps in breaking vicious circle of poverty
Inducement to invest
Expansion in the extent of the market
Technical progress
Efficient use of means of production
Import of capital goods and export of primary goods
Basis of import of foreign capital
Healthy competition

6. 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

7. OBSTACLES IN THE WAY OF EXPORT PROMOTION
Foreign competition
High prices
Substitutes
Low quality
Tariff policies
Limited market
Lack of publicity

8. 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

9. IMPORT SUBSTITUTION
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.”

10. KINDS OF IMPORT SUSTITUTION
SIMPLE SUBSTITUTION:
In this case, almost an imitation of import good is sought to be produced in the country. There is very little variation in shape and functioning from the import good. Example: production of cycle, food grain, etc.
ALTERNATIVE SUBSTITUTION: In this case, the substitutes produced indigenously vary in shape and function from the imported product. But its working is more or less the same. Example: use of copper tubes in sugar making machine, etc.

11. 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.

12. NEED OF IMPORT SUSTITUTION
Unfavorable balance of trade.
Devaluation of rupee.
Shortage of foreign exchange.
Declining foreign aid.
India mostly imports food grain, petroleum, fertilizers, machinery, metals and chemical products.
Developing nations has been experiencing the shortage of many important goods like petrol, fertilizers, etc.

13. OBJECTIVES OF IMPORT SUBSTITUTION POLICY
Import of raw material, spare part, etc. should be substitute by domestic products.
Reduction of import components in each unit of domestic output.
Production of chemical goods by domestically produced raw material.
To explore alternatives of imported goods and seek their production.
To increase the domestic production of such imported items as food grains, etc. so that dependence on imports is minimized.

14. METOD OF IMPORT SUBTITUTION
Tariff policy.
Increase in production.
Research.
Swadeshi spirit.

15. 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.”

16. 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.

17. 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.”