Write a note on domestic resource cost.

Domestic resource cost measures the resource cost of manufacturing a product as against the cost of importing/exporting it. It indicates the long term comparative advantage a country enjoys in the production of a particular product. The output from any project adds to domestic availability implying a notional reduction in imports to the extent of output of the project or an addition to exports if the product is being exported. This in turn implies that foreign exchange is saved to the extent there is reduced imports or foreign exchange is earned to the extent there is increased exports. However, in the setting up of the project itself and in the manufacturing of the product, foreign exchange outflows may be incurred in order to procure machinery, raw materials etc. The foreign exchange saved or earned thus has to be adjusted for such outflow.