What’s in the news?
- Export and Import Bank of India (Exim Bank) released a study titled ‘Self-Reliant India: Approach and Strategic Sectors to Focus.’
Highlights of the study
- Promoting self-reliance in sectors such as electronics and defence equipment, among others, can lead to import substitution of over $186 billion for India.
- Other sectors identified for import substitution and enhancing domestic production include machinery, chemicals and allied sectors, and select agricultural products.
- The study has also included sectors such as auto components, and iron and steel where, though there is overall trade surplus for the country, but in some sub-categories, there is trade deficit, particularly with China.
- These sectors account for more than $186 billion of imports by India, with a share of nearly 39% in overall imports and 50% in the non-oil imports by India.
- The study recommended several sector-specific strategies for reducing import dependence by enhancing domestic production, based on an assessment of the specific needs and issues faced by each of the sectors.
What is ‘Import substitution’?
- It is the policy of encouraging domestic production by raising barriers against the import of goods from foreign economies.
- It is usually recommended by some economists as a way to encourage self-sufficiency, and also to aid the development of local industries.
- It was most popular in Latin America in the 20th century, and India too adopted it prior to the liberalisation of its economy in 1991.
- Critics have argued that protectionist measures like import substitution make consumers poorer in the long run, by preventing them from enjoying the benefits of free trade. Also, given the restrictions imposed on foreign trade, it can lead to bureaucratic corruption.
About EXIM Bank
- Export-Import Bank of India is a specialized financial institution, wholly owned by Government of India, set up in 1982, for financing, facilitating and promoting foreign trade of India.
- EXIM Bank provides financial assistance to exporters and importers.
- It functions as the principal financial institution for coordination the work of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade.