What is import substitution, Business Economics

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What is import substitution?

Import substitution:

It is a government industrialisation policy for development by replacing imports along with domestic production.

Stage 1: Identify labour intensive domestic industries now met by imports for example textiles, shoes and clothes.
Stage 2: Import the capital and intermediate goods required to make labour intensive and low capital goods.
Stage 3: Prevent such infant industries along with quotas and tariffs. Domestic output starts to replace imports.
Stage 4: Start exporting or make own capital goods.

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