Question

Explain the use of import substitution and export promotion by developing economies.

Answer 1

The Deficit BOP is the huge problem for the Developing countries economic and non-economic factors causes for adverse BOP.

The following correcting methods used correct Deficit BOP

IMPORT SUBSTITUTION - country importing goods from the other counties which cause deficit BOP alternative solution is developing import-substitution goods example if the country is importing TV and causes deficit BOP then government must encourage the domestic producer to encourage that goods.

EXPORT PROMOTION- if demand for particular goods is more elastic international market government must encourage those firms to produce more goods by giving subsidies, and tax holidays benefits or providing suitable training to labors hence it enhances the market share.