Technological versus Pecuniary External Economies: The Former Should Rule the Roost

Global Journal of Emerging Market Economies

2022

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The current focus emphasizes the difficult choices faced by Indian management of the impossible trinity to manage import-led growth. The management highlights two mechanisms by which FDI (foreign direct investment) flows are easily substituted for short-run FII (foreign institutional investment) flows. First, GDP and its growth in an open economy framework and the associated international trade participation can clarify this substitution prospect. Specifically, this study develops reasoning whereby imports under the trilemma management can give some decisive advantage to FII at the cost of FDI to manage Indian import-led growth. Second, it underlines how the related policies, especially the sterilization interventions, constrain the interactions of higher domestic investments (domestic savings), spillover impacts of imports of intermediate and capital goods, and specialized FDI. If so, the Indian economy’s import-led growth can indicate FII and FDI tradeoffs. The study uses the ARDL regression method. The results show that the Indian policy-led macro environment can limit the scope of specialized FDI that aims to induce advanced domestic investment, exports, and FDI interactions. India’s focus on import-led growth thereby underpins how FII substitutes FDI.

Section: Costs Of Policy Stance Ii: Growth and Fii And Fdi Trade Offmentioning

confidence: 99%

mentioning

confidence: 99%

Indian Experience of Managing Impossible Trinity, Growth and Possible Tradeoff Between FDI and FIIs: Nature of Capital Inflows Matter

Global Journal of Emerging Market Economies

2022

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“…This would demand a more accurate scientific investigation of the principles underlying the specializations. Such investigation and concentrated efforts at seeking solutions are important forces behind further improvements (Schmookler, 1966; also see, Padhi, 2014Padhi, , 2018Padhi, , 2019. The employmentcentric learning by doing dynamics support further division of laborthe coming up of specialized firms in specialized sub-tasks, in production, in marketing, in transport, etc.…”

Section: Alternative Keynesian Young-kaldor Domestic Revivalmentioning

confidence: 99%

Determinants of foreign direct investment: employment status and potential of food processing industry in India

2022

IJOEM

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PurposeThe paper underpins an advanced domestic manufacturing that comes with some advanced employment specialization status of individual industries as the key determinant of foreign direct investment (FDI) and considers how FDI in the food processing industry in India relates to this focal point.Design/methodology/approachThis paper investigates how inward FDI inflows relate to domestic investment and revival in the industry using Auto Regressive Distributed lags (ARDL) model over the period 2000–2017. The model allows for different specifications to study whether FDI is responsible for the revival or the prior revival induces the FDI.FindingsThe results show the lack of proper advanced specialized employment status of the food processing industry. FDI in food processing is mainly guided by exports and imports opportunities and FDI plays no role in the revival of advanced growth in the industry. This finding explains why FDI in the industry is predominantly service sector oriented.Originality/valueThe paper underlines (1) the proper conceptualization of human capital as an important determinant of FDI; (2) reinterpretation of Kaldor's technical progress function that uncovers how employment dynamics embedded in intermediate goods specializations play a key role in supporting a higher pace of investment (and FDI); (3) labor costs' importance should involve not only the wage rate but also the advantages that a specialized employment base and (4) FDI in manufacturing demands a greater policy focus on developing domestic bases of intermediate goods specializations.

“…To elaborate, in an alternative focus, imports of advanced technology can induce both dynamic learning by doing—not the Arrovian one—and technological external economies (see Padhi, 2019). These can translate into new investment opportunities and support the coming up of a dynamic domestic production base—imports of specialised goods or tasks can support enhanced domestic efforts to create and add to the varieties of technology specialisations.…”

Section: Introductionmentioning

confidence: 99%

“…The role of dynamic learning by doing and external economies, however, brings in a more Keynesian policy focus (see Padhi, 2019). The focus is on the policy support for the imports-led higher induced new finance-led domestic investment opportunities and the higher pace of investment can outpace savings in each period’s income determination process.…”

Section: Introductionmentioning

confidence: 99%

Depreciation and Trade Deficits in India: Problems of Foreign Exchange and Domestic Industrialisation Base

The Indian Economic Journal

2019

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The present article develops an argument in which depreciating Indian rupee is basically due to underdeveloped status of domestic production base that is reflected in continuing trade deficits. It argues that price theoretic policies not only manage trade imbalances but also completely neglect the revival of domestic production base that can induce a tendency towards exports-led correction of the trade imbalances, that is, it neglects the importance of exports to make a transition towards strong production base, manageable trade balances and strong foreign exchange status; if so, the continuing Indian deprecation negates international financial stability status. The present article provides an alternative policy focus that is on finance-led initiations of broader Youngian–Kaldorian division of labour that favourably shapes demand-based market mechanism (and growth of aggregate demand) and results in sophistication in industrial differentiation, that is, increased specialisations in intermediate goods production. It is argued that such transition confers a developed status with respect to the (BBoP basic Balance of Payments i.e., trade and foreign direct investment [FDI] inflow prospects), which in turn is crucial to achieve financial balance of payments (BoP) stability. All in all, the price theory is inapplicable when trade is based on absolute cost disadvantages and Keynesian policies provide the solutions.