Even if exogenous factors do contribute to growth as seen in today’s world, foreign aid, FDI tech transfers etc., the endogenous characteristics of an economy – internal policies, political stability and so on will affect the extent to which these exogenous benefits are internalised.
Classical theories by Smith on specialisation, division of labour and increasing returns to scale only applicable when it comes to industrial or manufacturing industries and hence, relevant wrt to industrialised economies –the advanced countries of today. More gains in terms of economies of scale, technological advances and prices. Where most middle income dev ecos and low income ecos are agrarian – the theory does not hold as agriculture faces diminishing
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Trade and growth again seem to have very limited and conditional relationship. The costs of integration in the world market. Terms of trade unfavourable for the developing economies.
Harrod domar – assumed closed economy, no foreign trade – infer that growth for an economy should come from within the economy’s resources making full utilization of the country’s resources for its benefit. Growth/development a function of Savings and investment in an economy. The reason why poor countries are poor is due to a fundamental savings gap/lack of capital accumulation which is then not enough to capitalise on investment opportunities and low productivity. So the way out is to increase savings, investment and its productivity – by tech changes. Savings gap facilitated by foreign aid, private foreign investment. Similar to Marshall Plan rationalisation – American financial support to European countries post WWII – discourage Soviet Union communist expansion and capitalism promotion.
Policy implications – sectoral investment – structural transformation. Ricardo’s comparative advantage theory can be tweeked to mean that a country should invest in that sector where it has a higher output-capital ratio. Labour intensive activities?
Asian crisis – premature financial liberalisation and timing. Govt planning to improve investment qualities, create an enabling environment. India’s five yr plan – investment heavy plan in line with harrod domar model.
HD + Lewis and even AS – focus on
Despite this India is still a complicated place for foreign investors. A weak parliamentary government has very little purview over the provincial and local ministers who were elected entirely separate from federal elections. The fragmented nature of the country’s political system has and will continue to prevent major
There is no doubt that increasing in international trade is supporting the economic growth across the world, raising incomes and creating jobs. However, international trade can also some create economic obstacles, such as the international context and the market policy and regulations of each country, and consequently it can be said that the effects would have positive and negative sides, and it is useful to mention all of them and to take them into consideration.
The BRIC emerging economies are some of the most successful market liberalisers with India having particular prosperity in liberalising its inward capital flows and currency convertibility from 1991 to foreign investors. Post liberalisation India is regarded as one of the fastest growing economies with an annual growth rate of 6.86% compared to 4.07% pre liberalisation (World Bank, 2014). Economists such as Saikia (2012) regards this success down to India’s rise in investment. In the decade after reforms FDI inflows to India has grown by a staggering sixty fold increase to $6 billion (Kletzer, 2004) showing how the India economy has become a major destination for FDI and is reaping the economic benefits.
Global growth is an increase in the amount of goods and services produced per head. The graph shows that there is a clear correlation between global economic growth and international trade. Up until 1990 to 2008 both global economic growth and international trade steadily increased. However in 2008 when there was a global recession world exports where 16000bn which surpassed world GDP which was 70,000bn. After 2008 both world exports and world GDP fluctuated, in 2010 world exports decreased however it slowly increased to exceed world GDP. Currently both are at the same point on the graph with world exports at 19000bn and world GDP at 80,000. Therefore the graph demonstrates a clear causal link between global growth and global
Economic growth, put simply, is “an increase in the amount of goods and services produced per head of the population over a period of time”; development is inextricably linked with this economic growth. By utilising theories of economic growth and development we can see how the Chinese and Sub-Saharan African economies have emerged, but, more notably, we can use these to look at patterns from past and present to show their experience and the implications of this growth for the future.
Moreover, falling terms of trade due to primary product dependency could limit economic development. This is illustrated by the Prebisch-Singer hypothesis states that primary products tend to be income inelastic whereas the demand for manufactured good is income elastic in the long run. Therefore, as real incomes rise, the demand for manufactured goods will increase at a faster rate than the demand for primary products. This therefore means that primary product dependency acts as a limit to development in developing countries because it means that in the long run the terms of trade would be better for manufacturing products thus there would be more financial
As I would like to think, I trust that; As more individuals are utilized, the measure of capital expands, training levels increment, the nature of capital changes, or the innovation builds, the profitable limit of the economy increments. In this manner, the economy can build its yield giving customers more dispensable cash flow, advancing an expansion in utilization spending, and giving assets to business to use for further venture and government to use to give open goods and services.Expanded work effort interest builds yield. Extended, enhanced education makes more beneficial laborers. Business and government spending on innovative work improve our capacities to create and permit every specialist to wind up more beneficial,
Evidence also shows that free trade stimulates a chain of growth in the economy because as economy becomes better as an effect of free trade, spending in the market increases, increasing demand. This results
This article helps to see the theoretical development of comparative advantage through the findings of David ricardo. It states how the basis of this model can be applied to multiple goods and actually be used to benefit countries and have gains from trade.
Such position is centered on a two-step argument that recognizes the growth-enhancing potential of openness and, in its turn, growth's relevance to poverty reduction. Furthermore, it is also recognized the necessity of prudent, gradual and sustainable openness in order to dissociate the link between economic growth and social disruptions. This means that both trade and investment are here considered to be "engine[s] of growth" (Robertson, 1940) and that growth must be the principal (although not the only) strategy for reducing scarcity, increasing employment opportunities, and minimizing poverty. According to Bhagwati (2007,
The international trade relationship among countries is complex which combined both challenges and opportunities. International trade agreements between countries might bring some opportunities to some developing countries in some
Since the liberalization, privatization and globalization (L.P.G) in the early 1990’s the Indian economy has had a deep impact on its financial services sector, it is during this L.P.G era the reform’s in financial sector were initiated by the government of India to meet the challenges of complex financial architecture. This reform ensured that the new Indian financial system will forge out into a transparent, strong and resilient system. At present the Indian economy grew by 7.3 percent, a full year growth for the fiscal year ending in march based on the statistical method based of gross value added (GVA) keeping base year as 2011-2012 as against 2005.
Both the traditional free trade version and new international trade theories failed address the dynamic implication of trade opening in terms of economic development and growth of the training partners, especially so for the developing countries. Unrealistic classical and more realistic new version of trade theories failed to address the issue of economic development and growth which include, “viewing change by comparing static equilibrium states, rather than as a process occurring in historical irreversible time (Bhattacharjea
He pointed out that different economic levels have their own requirements and they may not follow the same process of industrialization. Moreover, he raised the most influential theory related to late industrialization that the economically backward states may have rapider growth rate as they are late comers, and the national development process relied on the degree of economic backwardness. That is to say the more backward a country, the faster it will advance (ibid).
gives the details the methodological issues and about data set. Section 5 gives the concluding