Question

How can the government correct an adverse balance of payments through export promotion?

Answer 1

1. The government may pursue various export promotion measures to stimulate exports. First, it may reduce export duties so as to encourage exports.
2. Second, cash assistance and subsidies can be given to exporters to stimulate exports.
3. Thirdly, various facilities like quality control, provision of market information and arranging exhibitions of exportable goods in foreign countries can be provided to promote exports.
4. Fourth, goods meant for export can be exempted from various taxes as an incentive to the exporters.
5. Fifth, export-orientated industries may be encouraged by providing tax benefits, finances, raw materials, etc. so that cost of production goes down and exports become competitive in the international market.
6. Sixth, attempts should also be made to encourage tourism by attracting foreign tourists so as to earn a large amount of foreign exchange.