Before starting with investment models we must understand what investment is. Investing is the exchange of money for profitable assets. The same profit is used to invest in other assets. Investment is important for a country’s economic well-being, as it contributes to growth and development. When a government invests in a business, agriculture, manufacturing, or support industry, it can create employment opportunities for its people. However, a strong investment scenario is when the government and the private sector work together to create investment opportunities. Also, we make an investment and choose a proxy for a investment model, we should keep in mind that the following factors are involved: Savings rate. National tax rate. (Net profit after tax). inflation. Bank interest rates. Potential rate of return on investment. Availability of other factors of production (cheap land, labor, etc.) and the infrastructure that underpins them-transportation, energy, telecommunications. Market size and stability.
TYPES OF INVESTMENT MODELS
The following are the main investment models Public investment models: In public investment models, the government makes investments in specific goods and services through the central or state government or with support from the public sector using the revenue generated from this activity. . Private Investment Model: As is the case with India, there are times when public sector revenues are not sufficient to cover some of the revenue shortfalls that may arise. Therefore, the government invites private members to invest in some of its companies. This investment can be domestic or foreign. Foreign direct investment (FDI) can improve existing infrastructure and create jobs in the process. This model is one of the most sought-after in terms of outside investment. Public-private partnership model: A public-private partnership (PPP, 3P, or P3) is a partnership agreement between two or more public and private sectors, usually on a long-term basis. The following sectors in India already have projects based on the PPP model: Health, Power industry, Railways, Urban housing.
There are also other investment models. They are as follows: Country investment model: can be public company or PPP Foreign investment model: can be mostly foreign or a mixture of foreign – domestic Sector-specific investment models: where investments are made in special economic zones or other related sectors Cluster investment models: Investment in manufacturing industries is an example.
INVESTMENT MODELS USED IN INDIA
The following investment models are used:
Harrod-Domar model: This model is biased towards an industry model in which the driver of economic growth depends on policies that increase saving and technological progress.
The Solow Swan Model: This is an extension of the Harrod-Domar model, with a particular focus on productivity growth.
Feldman – Mahalanobis Model: This model focuses on improving the domestic consumer goods sector, where there is sufficient capital sector commodity capacity. It then evolved into the four-zone pattern also known as the Nehru-Mahalanobis model.
Rao ManMohan Model: Named after Narasimha Rao and Dr. Manmohan Singh, this model applies the policy of economic liberalization and FDI inflows in 1999. Lewis model of economic development through supply unlimited labor.
Sources: https://www.insightsonindia.com/indian-economy-3/investment-models/
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