G6

• Industrialization


  The process by which an economy shifts its focus from primarily agricultural and rural activities toward manufacturing and industrial production as the dominant economic activity
• Urbanization


  The process of population concentration in urban areas due to factors such as industrialization, economic opportunities, and social developments. It involves the growth of cities and towns as people migrate from rural areas to urban centers in search of employment, better living standards, and access to services and amenities
• Industrial Policy


  • Strategies for Industrial Growth
• Market Failures


  A market's inability to deliver its theoretical benefits due to the existence of market imperfections
• Types of Market Failures

  • Externalities
  • Public Goods
  • Market Power & Monopolistic Practices
  • Information Asymmetry
• Externalities


  A cost or benefit caused by an economic actor that is not suffered or enjoyed by that same actor
• Positive Externalities


  When consuming or producing a good causes a benefit to a third party, e.g. technological innovation, knowledge spillovers, and infrastructure development
• Negative Externalities


  When consuming or producing a good causes a cost to a third party, e.g. pollution, environmental degradation, and public health hazards
• Public Goods


  Goods that are non-excludable and non-rivalrous. This means that individuals cannot be excluded from using them, and one person's use of the good does not reduce its availability to others
• Non-Excludability


  Once the good is provided, it is not possible to prevent people from using it. This leads to the "free rider" problem, where individuals benefit from the good without paying for it
• Non-Rivalry


  One person's use of the good does not diminish its availability to others. Multiple people can use the good simultaneously without depleting its value
• Market Power


  The ability of a firm or a group of firms to influence or control the price and output levels in a market
• Monopolistic Practices


  Actions taken by a firm to maintain or extend its market power, often at the expense of competition and consumer welfare
• Information Asymmetry


  When one party in a transaction is in possession of more information than the other, leading to suboptimal market outcomes
• Adverse Selection


  This occurs when one party takes advantage of having more information before a transaction takes place, often leading to the selection of poorer-quality goods or higher-risk participants
• Moral Hazard


  This occurs when one party takes on more risk because they do not bear the full consequences of that risk, usually after a transaction has occurred
• Industrial Policy


  The strategic effort by the state to encourage the development and growth of a sector of the economy
• Rationale of Industrial Policy

  • Correct the imbalances in the development of industries and helps in bringing about a desirable balance and diversification
  • Prevent the wasteful use of scarce resources and direct their flow in the most desirable areas of investment in accordance with national priorities
  • Empower the government to regulate the establishment and expansion of private industry in accordance with the planned objectives
  • Prevent, through fiscal and monetary policies, the formation of monopolies and concentration of wealth in a few hands so that the evils associated with monopolies can be effectively curbed
  • Give guidelines for importing foreign capital and the conditions on which such capital should be permitted to operate
• Types of Industrial Policies

  • Horizontal Policies
  • Sector-Specific Policies
  • Targeted Support
• Horizontal Policies


  Designed to impact all industries uniformly. Focus on improving overall economic conditions, infrastructure, and business environment. Often include measures like tax cuts, regulatory simplification, and support for innovation and research
• Sector-Specific Policies


  Targeted at specific industries or sectors. Address unique needs and challenges of particular sectors. Often focus on industries deemed crucial for national interest or economic growth
• Targeted Support


  Directed at specific companies or projects, often within a strategic sector. Includes financial aid, subsidies, or other forms of support to specific entities. Aimed at achieving specific economic objectives, such as technological advancement or job creation
• Strategies for Industrial Growth

  • Investment in Infrastructure
  • Innovation and R&D
  • Human Capital Development
  • Regulatory Framework
  • Financial Incentives
  • Trade Policies
• Investment in Infrastructure


  • Foundation for Industrial Activities
  • Cost Reduction
  • Attracting Investment
• China's Belt and Road Initiative (BRI)


  • Massive infrastructure investments across Asia, Europe, and Africa aim to enhance connectivity and trade, stimulating industrial growth along the routes
• Innovation and R&D


  • Technological Advancement
  • Productivity Improvement
  • Market Leadership
• South Korea


  • Provides a compelling example of how investment in innovation and R&D can drive industrial growth
• Human Capital Development


  • Skilled Workforce
  • Adaptability
  • Economic Growth
• Germany's Dual Education System


  • Combines apprenticeships in companies with vocational education in schools, providing skilled labor tailored to industrial needs
• Skilled Workforce


  • Education and training programs ensure the availability of a skilled workforce capable of operating advanced technologies and driving innovation
• Adaptability


  • Continuous learning and development enable workers to adapt to new industrial trends and technologies
• Economic Growth


  • A well-educated workforce contributes to higher productivity and economic growth
• Business Environment


  • Clear and stable regulations create a predictable environment, encouraging investment and industrial activities
• Fair Competition


  • Effective regulations prevent monopolies, ensure fair competition, and protect consumer rights
• Safety and Standards


  • Regulations enforce safety standards and environmental protections, contributing to sustainable industrial growth
• Encouraging Investment


  • Subsidies, tax incentives, and grants reduce the financial burden on industries, encouraging investment in new projects and expansions
• Supporting Innovation


  • Financial incentives for R&D activities help industries innovate without bearing the entire cost
• Market Development


  • Incentives can help industries enter new markets or develop strategic sectors
• Market Access


  • Trade agreements open up new markets for industrial products, increasing demand and growth opportunities
• Competitiveness

  • Favorable trade policies enhance the competitiveness of domestic industries in the global market