Import Substitution vs Export Promotion

📤

What is Export?

Export means selling goods and services produced in our country to other countries.

                    Key Point: When we export, we earn foreign currency (like US Dollars, Euros, etc.)
                

📥

What is Import?

Import means buying goods and services from other countries to bring into our country.

                    Key Point: When we import, we spend foreign currency to buy from other countries
                

🇮🇳 India Exports

IT Services
Textiles
Pharmaceuticals
Rice & Spices
Jewelry

🌍 India Imports

Crude Oil
Gold
Electronics
Machinery
Coal

💱 How Foreign Exchange Works

Foreign Exchange (Forex) is like the money of other countries. Just like we use Indian Rupees (₹) in India, other countries use their own currencies - USA uses Dollars ($), Europe uses Euros (€), Japan uses Yen (¥).

📤 When India Exports

Foreign buyers pay us in their currency (like USD)

➡️

🏦 Government Reserves

RBI (Reserve Bank of India) keeps these foreign currencies as reserves

📥 When India Imports

We need foreign currency to pay foreign sellers

➡️

💱 Currency Exchange

We convert ₹ to foreign currency through banks/government

🏪

How Do People Get Foreign Currency?

Step 1

Go to bank or authorized dealer

➡️

Step 2

Show valid documents & purpose

➡️

Step 3

Exchange ₹ for foreign currency at current rate

                💡 Why Foreign Exchange Reserves are Important:
                Economic Stability: Helps stabilize currency value
Import Payments: Ensures we can pay for essential imports
Crisis Management: Provides buffer during economic difficulties
Confidence: Shows world that our economy is strong

            

🏭 Import Substitution

Main Idea: "Let's make it ourselves instead of buying from others!"

How it works:

Encourage domestic production
Put high taxes (tariffs) on imports
Make foreign goods expensive
Protect local industries from competition
Reduce dependency on other countries

🚀 Export Promotion

Main Idea: "Let's sell more to the world and earn foreign money!"

How it works:

Focus on producing for global markets
Give incentives to exporters
Improve quality to compete globally
Earn more foreign exchange
Integrate with world economy

🎯 Policy Tools Used

Import Substitution Tools

High import tariffs
Import quotas/limits
Subsidies to local firms
Licensing requirements

Export Promotion Tools

Export subsidies
Tax benefits for exporters
Export credit facilities
Special Economic Zones