Import Composition and Sources

Import Composition and Sources

Commodity Breakdown

A high volume of imports of intermediate and capital goods is generally good where these are used to manufacture other items or to generate invisible earnings. This adds value to GDP and perhaps contributes to future export growth. For example, a country buying aircraft form abroad records these as imports. In later years, the aircraft will be used to move passengers and generate profit which are invisible export earnings.
Note though that manufacturing output declines in the short term when imports displace locally processed or manufactured items. Developing countries increasingly export semi manufactured (such as cloth and refined petroleum products) rather than raw materials (such as cotton and crude oil) and the industrial countries import more semi manufacturers and fewer raw materials.
Increases in the volume of imports of consumer goods are a direct signal of consumer demand. They imply that domestic produces cannot meet the required price, quality and quantity.

Compressibility

When examining a developing country it is important to check the compressibility of imports, that is, the extent to which there are non-essential goods which need not be imported in times of stress on the balance of payments. If all imports are essential such as foods and fuels it may not be possible to reduce the import bills.

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