Industrialization and economic growth an analysis of selected newly industrialized economies

Abstract

This study analysed the important dynamics of industrialization and economic growth in selected NIEs (Hong Kong, Taiwan, Singapore, South Korea) as well as in China and India during 1981-2020. It also estimated the relationship and causality between industrialization and economic growth and the important determinants of industrialization using ARDL and panel data models. Important lessons for achieving industrialization and economic growth have been drawn for India and developing economies. The appraisal and analysis of the industrial policies and the trends and patterns in these economies revealed that NIEs recorded the highest growth in the world during the study period due to their selective, pragmatic, and dynamic industrial policies with a clear vision of industrial growth. NIEs experienced rapid economic growth with higher industrial growth and moved to the services sector after achieving the threshold level of industrialization, though their economic growth slowed. In NIEs, an inverted U pattern emerged in economic and industrial growth. Conversely, India turned directly to the services sector without industrializing its economy (premature deindustrialization). However, results established that there is a casualty between economic growth and industrialization in both the long run and short run, and FDI, exports, imports, agricultural production, and labour force are the key determinants of industrialization in India. Gross fixed capital formation has also been an important determinant in NIEs. This study established that industrial policies create the basic foundation and should be restrictive, protective, and supportive to develop domestic strategic industries until full industrialization. Therefore, India and other developing economies must consider these determinants and frame their industrial policies accordingly to achieve a higher level of industrialization. newline