Export-Led Growth Strategy by Dr. Ruby Ojha
Post on 07-Apr-2018
230 Views
Preview:
Transcript
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
1/20
EXPORT-LED GROWTHVS.DOMESTIC DEMAND-LED GROWTH:
A POLICY CHOICE IN INDIAN CONTEXTDr. Ruby Ojha
Associate Professor,
Dept. of Economics,PGSR,
SNDT Womens
University,
Churchgate, Mumbai400020
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
2/20
INTRODUCTIONThe export-led growth model was
initially upheld with the success ofAsia's miracle countries, whichachieved extraordinarily high growth
between the 1970s and mid-1990s,supposedly through export promotion.The growth records of Asian newly
industrializing countries (NICs) - inparticular, Hong Kong, Singapore,Korea and Taiwan, second-generationNICs (Malaysia and Thailand) - are
cited as such examples. 2
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
3/20
INTRODUCTION
3
Over the last thirty years these NICshave approximately doubled theirstandards of living every ten years.
China is the latest country to join thisgroup
The World Bank (1993) perceives thatthe experiences of these countries serve
as a model for development, a view alsosupported by the US Agency forInternational Development and theInternational Monetary Fund
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
4/20
THE CASE FOR EXPORT-LED GROWTH
4
export growth may represent an increase in demand for thecountrys output and thus serves to increase real output.an expansion in exports may promote specialization in theproduction of export products.an increase in exports may loosen a foreign exchange constraint
which makes it easier to import inputs to meet domesticdemand.Participating in trade, especially export production and promotion,
exposes a country to the latest and most advanced production andmarketing techniques, that brings about dynamic innovation and
technological diffusion into the economy.Since countries need precious foreign exchange for their development
needs, export earnings are a more efficient means to finance theseneeds than foreign debt .
export-led strategies allow an expansion of aggregate demand without
much inflationary pressure.
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
5/20
BUT, THE SUPPORT FOR EXPORT-LED GROWTH IS NOT UNIVERSAL.
CRITICS POINT OUT THAT THEEXPERIENCES IN THE EAST AND
SOUTHEAST ASIAN COUNTRIES ARE
UNIQUE IN MANY WAYS AND NOTNECESSARILY SUSTAINABLE AND
REPLICABLE IN OTHER COUNTRIES.
5
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
6/20
A near-collapse in internationaltrade that followed a synchronized
global recession in 2008 hasseriously dentedAsias confidencein this growth policy as demandfrom major developed economies
plummeted, leading to theInternational Monetary Fundanticipating a double-digitcontraction in world trade volume.Most of the critics argued that theemphasis on export-led growth ofmost East Asia countries had aseries of negative effects.
6
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
7/20
PROBLEMS OF EXPORT-LED GROWTH It prevented the development of domestic market
growth
reinforced the dependency of developing countries onthe developed world
not an optimal strategy
any longer and it is risky
and dependent on the
consumption pattern ofothers
7
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
8/20
PROBLEMS OF EXPORT-LED GROWTH CONTD. race to the bottom deterioration in developing countries
terms of trade impact of export-led growth on financial
instability issues of autonomy it suffers from a fallacy of composition
it has tilted the focus away from developmentrooted in domestic market growth It has placed workers in developing countries in
conflict with workers in industrialized countries
It has also harmed the global economy bycreatin an environment of excess ca acit and 8
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
9/20
Export-led growth can workfor first comers, but it fallsapart once all try to clamberon board the export-ledbandwagon. If true, theexport-led growth paradigmwill find itself checkmated
while new supplier countrieswill be unable to competewith China.
9
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
10/20
THE CASE FOR DOMESTIC DEMAND-LED GROWTHGiven the deficiencies of
export-led growth, developingcountries need a new model ofdevelopment and domesticdemand-led growth strategy
serves the purpose. DeutscheBank Research of July 2009says that EM-6 have been (orwill be) able to engineer a moreor less rapid recovery by
boosting domestic demand.Achieving such an outcome willrequire a new constellation ofpolicies to expand the domestic
market. 10
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
11/20
DOMESTIC DEMAND-LED GROWTH RESTS ONFOUR PILLARS: improved income distribution
good governance
financial stability and space for counter-cyclical stabilization policy
an adequate fairly priced supply ofdevelopment finance.
The policies needed to put these pillarsin place are:
(1) labor and democratic rights,
(2) appropriate reform and regulationof the financial architecture, and
(3) a combination of debt relief,increased foreign aid, and increaseddevelopment assistance provided
through expanded SDRs. 11
This is an instancewhere there is notrade-off betweenethically right andefficient economic
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
12/20
INDIAS CASE:
In this paper the case ofIndia has been analyzedwith respect to export-ledgrowth strategy anddomestic demand ledgrowth strategy. It hasbeen tried to find out
which strategy hascontributed more to thecountrys development.
12
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
13/20
PRE-REFORM RELATIONSHIP BETWEENEXPORT AND NNPFC
13
Particulars
Values
i 1950-51 to 1990-91
^1 12809.55011
^2 15.0922
Standard error of 1 (1) 3648.1689
Standard error of 2 (2) 0.40351
Table value of Z test for 1 and 2 at 5% level of significance 1.95
Table value of Z test for 1 and 2 at 1% level of significance 2.58
Calculated value of Z test for 1 35.112
Calculated value of Z test for 2 37.4023
The calculated F ratio is F* 1398.9595
R2 0.973
Coefficient of correlation ( r ) 0.986
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
14/20
POST -REFORM RELATIONSHIP BETWEENEXPORT AND NNPFC
14
Particulars Values
i 1991-92 to 2008-09
^1 531607.0395
^2 5.2525
Standard error of 1 (1) 64613.44711
Standard error of 2 (2) 0.186812
Table value of t=test for 1 and 2 at 5% level of significance 2.12
Table value of t=test for 1 and 2 at 1% level of significance 2.92
Calculated value of t=test for 1 8.2275
Calculated value of t=test for 2 28.1163
The calculated F ratio is 790.5263
R2 0.98
Coefficient of correlation 0.99
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
15/20
PRE- REFORM RELATIONSHIP BETWEENPRIVATE FINAL CONSUMPTION EXPENDITUREAND NNPFC
15
Particulars Values
i 1975-1990-91
^1 4352.14251
^2 1.34063
Standard error of 1 (1) 3740.532
Standard error of 2 (2) 0.021457
Table value of T test for 1 and 2 at 5% level of significance 2.145
Table value of T test for 1 and 2 at 1% level of significance 2.98
Calculated value of T test for 1 -1.1635
Calculated value of T test for 2 62.4797
The calculated F ratio is 3903.8115
R2 0.996
Coefficient of correlation (r) 0.998
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
16/20
POST-REFORM RELATIONSHIP BETWEENPRIVATE FINAL CONSUMPTION EXPENDITUREAND NNPFC
16
Particulars Values
i 1991-92 to 2007-08
^1 275056.423
^2 1.5766951
Standard error of 1 (1) 0.5501
Standard error of 2 (2) 0.05191
Table value of T test for 1 and 2 at 5% level of significance 2.131
Table value of T test for 1 and 2 at 1% level of significance 2.947
Calculated value of T test for 1 -5000011.6761
Calculated value of T test for 2 30.37363
The calculated F ratio is 922.4342
R2 0.984
Coefficient of correlation (r) 0.992
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
17/20
CONCLUSIONSIt is argued by Jesus Felipe (2003) that the
encouragement of a gradual shift to DomesticDemand Led Growth is a welcome effort. However,perhaps choosing either export-led growth ordomestic demand led growth is not the issue.
Firstly, because these two strategies need not beincompatible strategies.Secondly, because the countries in the region need
some form of export-led growth to achieve economiesof scale. It is about achieving a golden combination
between export-led growth and domestic demand ledgrowth. And
Thirdly, because the discussion of the policies toresume growth has to be framed in the more generalcontext of what is constraining growth today
17
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
18/20
CONCLUSIONS CONTD.
It is proved on the basis of the above empirical analysisthat growth of India is based on a combination of bothdomestic demand components and exports. In fact, interms of technology deepening and "learning bydoing," growth in both sectors will be complementaryand mutually reinforcing. successful and sustainedgrowth requires growth in both domestic demand andnet exports. It is when one strategy isoveremphasized at the expense of the other that the
growth strategy becomes unstable. 18
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
19/20
CONCLUSIONS CONTD.In the words of Blecker:
What is not feasible is for
all countries to attempt to
achieve trade surplusesby promoting their exportswhile simultaneously
restricting their imports orrepressing consumerdemand
19
8/3/2019 Export-Led Growth Strategy by Dr. Ruby Ojha
20/20
THANK YOU
20
top related