Pros And Cons Of Import Substitution

Import Substitution
Import Substitution means to reduce dependency on foreign production and encourage local production to boost local consumption. The import substitution approach substitutes externally produced goods and services, especially basic necessities such as energy, food, and water, with locally produced ones. By doing so, local communities can put their (hard-earned) money to work within their boundaries.

History
In 1950s and 1960s it was used as a strategy to promote economic development in developing countries. This initial effort failed because of large inefficiencies in production facilities because of which the local market was unable to compete with the global market. Hence, after this, countries now rely on foreign-produced products as globalization concept suggests.

The Strategy and its Aims
An economy is often described as a “leaky bucket” in which the bucket

It also increases production in the short run, creating employment locally.

Import Substitution in Pakistan in 1960s
Pakistan government in the 60s encouraged import substitution for industrial growth in the consumer goods sector. Various protection measures were taken to safeguard domestic manufacturers which included;
High import tariffs on consumer goods
Low-priced credit facility
Import controls on competing items
On the other hand there was removal of import controls on industrial raw material and machinery.

In addition to the protection measures various incentives were given including

Bonus Voucher Schemes
Tax rebates
Tax exemptions
Accelerated depreciation allowances to augment after tax