6 Obstacles in Implementing an Import Substitution Strategy


January 15, 2019 admin 0 Comment

By implication, it cannot adopt a comprehensive and time-bound plan of replacing all its imports with domestic production. The process has to be a multi-phased one.

Import Needs:

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In majority of cases, starting a production facility creates import needs of related items like machinery, equipment, technology and the like. With the progress of IMS, the need for certain additional inputs (raw materials and spare parts etc.) also crops up.

Thus, to a certain extent, one set of imports gets replaced with another. In the process, paradoxically the total value of imports may even go up.

Feasibility:

It may not be technically possible for a country to substitute all imports with domestic production. Its natural resources like cultivable land, water resources, climatic conditions and mineral deposits etc. may not allow this.

International Commitments and Hurdles:

Even when a country has the resource potential to domestically produce an item; it may not be able to do so because of international restrictions in the form of patents, etc.

International Response:

Success of IMS does not depend only upon the soundness of domestic policy. It equally depends upon the response of countries whose exports get affected.

Demonstration Effect:

Equally relevant for the success of IMS is the response of the domestic economy. In spite of restrictions on imports, information regarding the availability of consumption goods in other countries filters in, and this creates a “demonstration effect” (that is, domestic demand for these goods).



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