East Asian Model for India
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East Asian Model for India
Introduction:
East Asian Growth Model is a comprehensive prototype suggested by the Economic Survey to achieve India’s ambitious target to become a $5 trillion economies by 2024-25.
According to the economic survey, India needs a cycle of savings, investments, and exports to transform India into a $5 trillion economy in the next five years.
It rightly underlines the need for India to revive private investment to become the world's third-largest economy soon.
Major catalysts that will boost growth:
Maintain the real GDP growth rate @ 8%
Encourage private investment -A key driver
Focus on exports
Job creation that will further boost savings and expenditure to facilitate economic growth
Utilize Current Demographic Advantage
East Asian Growth Model:
The East Asian model is an economic system where the government invests in certain sectors of the economy to stimulate the growth of new industries in the private sector.
It is state-sponsored capitalism, which includes
State Control of finance
Direct support of state-owned enterprises in strategic sectors of the economy
promoting a high rate of savings and investments
high educational standards
Export-oriented policy.
The East Asian model was largely driven by the newly industrialized East Asian economies of Singapore, Hong Kong, South Korea, and Taiwan, etc.
Steps followed by these countries to achieve the milestone:
Microeconomic stability
Low inflation
Fiscal discipline
Tight regulation of state-owned banks
Directed lending to govt and capping of interest rates
The close association between Govt. and banks
sophisticated industrial policies to promote domestic investment, much of which was export-led
How India can replicate the Model?
since 1991 India’s reforms have been rather haphazard and of a ‘stop-and-go’ nature, which has made it much more challenging for the country to take full advantage of its demographic dividend. So India needs policies and reforms that are carefully calibrated.
The Indian government needs to understand that a vertical industrial policy (economic growth) would not work without a sound horizontal industrial policy (dealing with labor, land reforms, bringing about basic literacy, and raising women’s participation in the labor force).
Measures like reducing policy uncertainty, ensuring the fiscal discipline; enhancing the efficiency of financial intermediation, dealing with land acquisition and environment clearances are all essential so that the investment rate can be again increased.