Every government relies on domestic as well as foreign trades for economic progress. However, there are a few key differences in how these two trades affect the economic health of a republic. Notably, it is not easy for any of these alone to drive the economy of an entire country. Yet, it is the manufacturing of products domestically that can give a quick boost to a nation’s economy.
Let us understand how domestic manufacturers accelerate the economic growth of a country.
Increase In Employment Rate For Domestic Population
Unemployment is one of the biggest challenges that any government can face on the path of economic growth. Simply because more unemployed people would suppress the already fragile economic system and burden the government reserves. However, when a domestic manufacturing unit is set up, several skilled and unskilled workers find employment. Now, an employed population would not only reduce the burden on the national treasures but also would contribute towards revenue generation for the government. This is the most fundamental rule of economic development.
Development Of The Supporting Infrastructure
Setting up a manufacturing plant demand some basic amenities. These amenities ensure the safe and efficient operation of the unit. Now this notion has a reverse side as well. When there are no manufacturing units to benefit from the infrastructure, there is no development. However, if the factories and production facilities are set up, they would also push the infrastructural development. For example, if there are no steel manufacturing facilities in an area, there are possibly meek chances of finding any supporting infrastructure. Now, these infrastructure elements may include utility supplies, transportation access, water supplies, nearby residential complex, and so on. Several manufacturing units also go to websites that offer backup infrastructure equipment, such as a diesel generator, as well. But, none of these trades and utilities are of any worth, if there are no industries in the region.
Higher Domestic Yield Invites Foreign Investments
One of the most significant benefits of domestic industrial development for any country is the potential for inviting foreign investments. As simple as that, when foreign investors bet their money on any trade-in an alien country, they help the treasures increase. Subsequently, this also has an impact on the country’s currency. In most likelihood, more foreign investments have a good impact on the currency. However, inviting foreign investments is not as easy as it sounds. The governments have to offer several other benefits to the investors, particularly, when the infrastructure in the country is weak.
Once again, domestic manufacturing units play an important role in bringing foreign investments. Consider this, if there are already micro or small industries operating in a particular trade, it guarantees the existence of infrastructural needs for the trade. Subsequently, the investments are also possible in two ways.
- Investment in supply chain
The first possibility is investments in the supply chain. Usually, when the yield from any domestic manufacturer exceeds the demand in the local market, they begin to penetrate into new markets. Essentially, these new markets demand efficient export and import channels to facilitate the movement of the goods. Foreign investors often show their interest in improving these supply chain channels.
- Investment in Infrastructure
The other possibility is when investors bet their money on the infrastructure. An investor may invest in setting up a new manufacturing facility or they may help create supporting services. For example, Coca-Cola usually set up their own manufacturing plants in any new location, or they sometimes outsource there manufacturing tasks. This is typically an example where a foreign investor puts their money in setting up a new manufacturing facility. On the other hand, there may be instances when a company may invest in supporting services, as already mentioned. For example, DHL is a global leader in providing transportation services for goods across countries and continents.
In a nutshell, foreign investments support both employment goals, manufacturing operations, and infrastructure development. And all of this is facilitated in addition to the economic growth for the country.
The Way Forward…
Most importantly, the economic growth of a country depends on how much revenue is generated domestically. In light of this statement, it is quite important for a country to promote its domestic production. In fact, the Gross Domestic Produce of a country is largely dependent on local trades.
- Easing The Norms For Setting Up A Manufacturing Unit
In order to promote domestic trades, governments need to simplify the process of setting up a manufacturing plant or a trade. This includes simplifying the rules and regulations, tax reforms, finance opportunities, and most importantly providing the technology. When all of these needs are provided, the domestic trade is sure to flourish and grow. And subsequently the economic growth of the country.
- Providing Industries With Supporting Infrastructure
Simplifying the process for setting up the manufacturing unit is just the beginning. In order to help the trades expand and scale, supporting infrastructure is as important as the basic norms. For instance, providing transportation facilities and easy access to energy resources can lower the cost of setting up a manufacturing plant. And thus, more and more investments would be made in the respective trades.
- Promoting Foreign Trade, Particularly The Export
Lastly, providing the opportunity for foreign trade is the key factor that increases the economic value of any business. Opening up the ports and cargo facilities for local traders is a basic necessity for foreign exchange. In other words, easy export norms and facilities boost the exchange rate in foreign currencies. And thus, help boost the economic development of a nation.
All in all, domestic manufacturers are the key to economic growth. And it is needless to say that a better economy reflects better life quality for the citizens of a country. Thus, improving other factors of the country’s development score. So, the government agencies and authorities need to focus their efforts on promoting domestic production. But, it is not limited to the authorities alone. The citizens of the country also need to put their efforts into creating more and more domestic opportunities for economic transactions.