Private Financial Flows
These are financial flows that originate with non-governmental entities, such as individuals, charities, and private firms. In decreasing order of magnitude, there are four private financial flows: foreign direct investment, international bank loans, international portfolio investments, and international bonds.
You have made a series of choices as the Secretary of Economic Development of Kashmir. Let's analyze each of your choices.
The Beijing Consensus model of economic development maximizes state control on economic development through state capitalism. Many firms are state-owned enterprises. Kashmiri firms will rarely experience economic volatility because your government will bail out its key industries' firms when necessary. However, these firms will have less incentive to innovate and charge lower prices, so your domestic economy will not grow and improve as much over time as an unregulated liberal capitalist economy.
Export-led growth is a market-accepting strategy that embraces international linkages, while helping firms that export goods to the world economy. This was the strategy of choice among the four Asian Tigers of Taiwan, South Korea, Singapore, and Hong Kong. All benefitted greatly from economic integration's development opportunities, including access to technology, labor, capital, and managerial expertise. At the same time, domestic firms were able to compete with the rough international competition through subsidies and preferential access to foreign currency. You can expect the same success with Kashmir.
Private financial flows will give your domestic firms access to foreign capital they can invest in development and innovation. In particular, foreign direct investment by multinational enterprises will drive domestic competition and bring technology, labor, capital, and managerial expertise to your domestic markets. International bank loans and international portfolio investments will help your firms in the short term, but the volatility of these financial flows will hurt the economic planning of these firms. Your domestic economy will surely grow, but the volatility of private financial flows could spur financial crises.
Overall, you have done a fair job as the Kashmiri economy will likely grow moderately and stably, but your development choices lower Kashmiri growth's ceiling and leave you vulnerable to financial volatility.