How do export-led growth and import-substitution industrialization differ?

How do export-led growth and import-substitution industrialization differ?

• A. Export-led growth focuses on domestic consumption; ISI focuses on exports
• B. Export-led growth focuses on producing for foreign markets to generate foreign currency; ISI aims to replace imports with domestic production, often with protectionism.
• C. Export-led growth reduces foreign currency requirements; ISI increases dependence on imports
• D. Export-led growth uses import tariffs on all goods; ISI uses no protection

Answer: (B)

Export-led growth concentrates on producing for foreign markets to earn foreign currency, pushing firms to compete internationally and integrate with global demand. Import-substitution industrialization, on the other hand, aims to reduce imports by building domestic production of goods that were previously imported, usually with protectionist tools like tariffs and quotas and state support. The core difference is outward orientation and foreign-exchange goals versus inward effort to replace imports through protected domestic industries. This is why export-led growth is linked to expanding exports and external currency earnings, while ISI centers on building local production to lessen reliance on imports.