What does the concept of "import substitution" refer to?

The concept of "import substitution" primarily refers to the strategy of promoting local production by reducing reliance on imported goods. This approach encourages countries to develop their own industries to produce goods that they would otherwise import, thus aiming to boost domestic economies, create jobs, and enhance self-sufficiency.

By focusing on local production, a country can stimulate its economy and decrease vulnerability to foreign market fluctuations, which can impact availability and prices of goods. This strategy often involves policies that support nascent industries, like grants or low-interest loans, and can lead to a shift in consumer habits, encouraging them to buy domestically produced products instead of imports.

While other approaches, such as encouraging exports and imposing higher tariffs, can relate to broader economic strategies, they do not capture the essence of import substitution, which is about prioritizing and enhancing domestic production to fill the gaps left by reduced imports.