Import revenue
What are imports and exports?
Countries depend on other countries for some raw materials, finished goods, technology, or food grains, etc. In good old days, these goods were bartered. In modern times, the goods are sold or bought in international markets. Goods bought by countries from another country, whether through companies, or individuals, or the governments are known as imports, and the goods sold by such entities to similar entities of other country are known as exports.
Why do countries, companies, or individuals import goods?
Governments of under-developed and developing nations that face food-shortage problems due to climate, pests, inadequate crop, or calamities like earthquakes, import agricultural products.
Cost of importing material differs from country to country because of distances, import revenues, and transportation costs. Therefore, companies using such materials come up in countries where they can get the required material at relatively cheaper price.
Artisans from some countries have acquired reputation over generations for some specific type of craftsmanship, which is valued across the globe. For example, goldsmiths in Asian countries export highly intricate hand crafted jewelry. There is a premium for the art, which is what the goldsmith earns. Therefore, goldsmith has to buy the gold from government agencies and add value to it. The government agencies, in turn, import gold for such use.
Technology changes from time to time. Not every country develops same techniques at the same time. Companies have to absorb evolving technologies; otherwise, they would soon find themselves losing their market share to competitive pricing of goods by other companies. Therefore, companies import and adopt technologies from other countries.
Oil, diesel, or petroleum, is an indispensable consumable in any manufacturing industry. If a country does not have adequate oil resources of its own, then, import is the only option. Otherwise, the industries would slowly die out, leaving many unemployed, and eventual crash of economy.
Individuals buy goods from other countries based on their personal preferences.
What is import revenue?
Import revenue or import duty or customs duty is a form of tax that is imposed by a country on imports. The object is to ensure that local industries manufacturing or producing the same or similar goods or materials stand a fair chance against the imported goods. This move is all the more necessary in cases of those local industries that produce the same good and contribute significant amount as taxes as these are likely to be wiped out by cheaper imported goods. Such tax is, thus, a way to protect the local industries.Alternately, import revenues prove to be a disincentive for importing and a method of preventing outflow of foreign exchange.
Foreign exchange has a potential purchasing power in international markets. Loss of foreign exchange means loss of this purchasing power. Economic consequences of such outflow are loss in currency value and currency purchasing power, higher interest rates on commercial borrowings, slow down of industrial growth, gross domestic product, and per capita income. Therefore, the country should have adequate foreign exchange reserves. Excess inflow of foreign exchange is also bad, as stronger currency of the country is likely to affect the cost of goods being exported, making them non-competitively priced in international markets. Recent studies have indicated that protectionism is detrimental to the long-term interests of the country or industry, even though it may save valuable foreign exchange in short-term. This is because lack of competition makes the local companies negligent about the quality and price aspect. Eventually, the demand slips and so does the profits of the industry. And the company has to close down anyway. Competition from foreign goods will, however, keep the industry on its toes.Utilization of import revenue.The revenue is generally utilized for infrastructure and other necessary development expenses within the country .The revenue is generally utilized for infrastructure and other necessary development expenses within the country.
Other Articles
