- Traditional model
- Precondition to take off-preparatory stage
- Take off stage
- Drive to maturity
- Age of mass consumption
Models used in planning process
- Harrod-domar model
- Focused on dynamic nature of demand and investment
- Two important factors of economic growth: rate of investment and capital output ratio
- Growth rate=investment/ capital-output ratio
- Only helpful for developed countries since in 3rd world system of market is not that rationally developed
- Peculiar condition of disguised unemployment, low propensity to save, and low productive capacity ignored
- However with little changes this can be made applicable to developing economies also
- Lewis model of development with unlimited labour supply
- Based on assumption that:
- Wage rate in the industry is slightly higher than subsistence level
- Investment in industry is not large relative to population growth
- Cost of training of skilled workers constant
- Process of economic growth must come to an end when
- No surplus labour is left
- Population declines
- Food prices rise pushing up wages
- Workers press for higher wages
- Mahalanobis model of economic growth
- Focused on investment in heavy industries for creating ideal condition for launching up process of growth
- For rapid growth and self reliance it is necessary to build
- Second five yr plan and nehru mahalanobis model
- Raising rate of investment
- Directing public investment toward development of industries
- Import substitution for self reliance
- System of control and industrial licensing
- Dominance of public sector
Investment infra model
- Issues in infra financing
- Funding gap, fiscal burden, asset-liability mismatch, takeout
financing, investment obligations of insurance and pension funds, need
for an efficient and vibrant corporate bond market, municipal bonds,
insufficiency of user charges, legal and procedural issues
- measures taken by the govt
- PPP, viability gap funding, FDI and infra development, IIFCL, infra
debt funds, infra bonds, foreign exchange reserves for infra
development, CDS, liberalisation and rationalisation of ECB policies
- Needs to be done
- Making infra projects commercially viable, greater participation of
state govt, improving efficiency of corporate bond market, credit
enhancement, single window clearance
- PPP
- 900 PPP projects in infra sector
- Jan, 2006 formed PPP appraisal committee which has approved 307 projects till now
- VGF for PPP projects
- India infra project development fund launched in 2007 to facilitate quality project development
- PMU at project authority level and PRU at ministry level
- Foreign investment
- FDI and FPI
- FPI investment made in financial assets, includes investment made by FII
- Two types of FDI: Greenfield investment and mergers and acquisition
- Forbidden territories: fields where FDI is not permitted
- FIPB: single window clearance, secy, clear proposal worth 1200 crore
- Invest India: 49%share from govt and 51% from FICCI
- Entry option
- Incorporated entity and unincorporated entity
- Recent initiatives to promote foreign investment
- Expansion of QFI
- QFI meeting KYC norms can invest directly
- Definition of QFI was expanded to include residents of GCC and EC as they are member of FATF
- Initiative to attract FII
- Limits have been increased
- Initiative for ECB
- Enhancing limit
- Allowing ECB for capital expenditure on maintenance and operation of toll booths
- Reducing withholding tax from 20% to 5%
- Permitting SIDBI as an eligible borrower for accessing ECB for MSMEs
- Impact: improved capital flows, volatility remains high, share of ECB has remained high
