Top 10 Arguments against the of Path of IMS on International Trade and Foreign Exchange


February 2, 2019 admin 0 Comment

3. External Indebtedness:

For the reasons described above, a country pursuing IMS is forced to rely on foreign loans to meet its obligations of external payments. This adds to its external indebtedness and strains its BOP position still further.

4. Primary Sector and Employment:

An IMS programme assigns a low priority to agriculture. It is primarily meant for the development of industrial and services sectors which, on account of high capital-intensity, cannot remove backlog of unemployment.

5. Planning and Implementation:

IMS is not an easy thing to do. It faces a lot of problems relating to effective planning, procedures, implementation and controls.

A cost-effective IMS requires a sensitive and quick decision-making mechanism. It should also be able to prevent the emergence of vested interests and tackle other problems like inefficiency and high costs.

Because of sheltered home markets, IMS has a tendency to get stuck with problems of poor quality products, and resource wastage.

6. Social Welfare:

With a slow increase in employment and stunted development of agricultural sector, inequalities of income and wealth distribution tend to increase and thus cause a reduction in national welfare. Huge monopoly profits are a typical feature of IMS. It also creates and perpetuates an era of shortages.

7. Comparative Advantage:

It is argued that IMS violates the principle of comparative advantage and thus leads to misallocation of resources.

8. Bureaucracy:

Successful implementation of a programme of IMS is heavily dependent upon bureaucracy, which is patently inefficient (at least in developing countries).

9. Technology:

An IMS programme tends to use technology which is already being phased out in advanced countries. Factually, the developing country ends up with outdated (though capital-intensive) technology and with hardly any resources allocated for R&D. Consequently, it tends to remain technologically backward.

10. Foreign Competition:

The programme for IMS is also likely to face practical difficulties in setting up new industries because of foreign competition.