Structural-hierarchical approach to the investment model of economic growth

Obolenskaya Lyudmila Vladislavna ORCID: 0000-0002-1016-9171 PhD in Technical Science Leading Researcher, Institute for Financial and Industrial Policy, Financial University under the Government of the Russian Federation 125167, Russia, Moscow, Moscow, Leningradsky Prospekt, 49 lvobolenskaya@fa.ru Other publications by this author

Bekulova Suzanna Robertinovna ORCID: 0000-0003-1384-4694 Junior Scientific Associate, Financial University under the Government of the Russian Federation 125993, Russia, Moscow, Leningradskii Prospekt, 49 suzi.94@mail.ru Other publications by this author

Introduction

Significant attention is paid to investment models of economic growth in scientific publications, Russian documents and speeches of officials.

For example, in ^[1] different concepts of investment growth models are considered, reflecting the typological features of the latter. The presented typology of investment models is based on a number of criteria: the availability of investment resources within the country; the degree of openness of the economy as a factor in attracting external investment resources; the degree of participation of the state and transnational organizations in the investment process; the presence of a crisis or extreme situation. The paper ^[2] focuses on the multidimensional nature of the investment model as an object of state regulation, highlights its factorial and target role in the economy. The role of the investment model in ensuring sustainable dynamics of economic growth and innovative and technological development is noted.

The topic of the need for the transition of the Russian economy to an investment model of development has been discussed for several years at the official level. So, the head of the Central Bank Nabiullina a few years ago voiced the position that the country needs a new model of economic development – savings and investment, where savings will "turn" into investments ^[3]. Assistant to the President of the Russian Federation Maxim Oreshkin, speaking about factors that can positively affect the dynamics of GDP in 2023, noted the following ^[4]. Currently, there is an unrealized potential of the money supply. The increase in accumulated funds for 2022 amounted to 20%: 13 trillion rubles. At the same time, most of the increase (8 trillion rubles) fell on the accounts of enterprises. These monetary resources will be poured into the economy through wage growth and investment, giving a positive impetus to the acceleration of economic dynamics.

The investment growth model has been actively used for several years by the Ministry of Economic Development in regularly developed forecasts of socio-economic development of the Russian Federation. Thus, in the draft forecast until 2035 prepared by the MAYOR, the investment growth model became the basis of one of the three scenarios of socio-economic development – the target one. The key difference between the target scenario and the other two was the higher dynamics of the growth of domestic investment, accompanied by an increase (compared to other scenarios) in labor productivity and income growth of the population. In the forecast of the socio-economic development of the Russian Federation up to 2036, prepared by the MAYOR, when highlighting the factors on which the projected results of the development of industries and other sectors of the economy depend, a significant place is given to investments in fixed assets and the growth of investment demand.

In a number of scientific studies, investments are interpreted as a significant factor of economic security ^[5-7]. At the same time, the study ^[5] concludes that the development of the investment sphere is an indicator of the state of affairs in the economy. In the source ^[6], investments are considered at the regional level. Their contribution to the formation of the orientation and ensuring the intensity of economic development is noted. It is concluded that investment security is one of the key components of the economic security of the region. The paper ^[7] analyzes the impact of the investment climate on the economic security of the country. It is concluded that economic security is the most important component of national security.

In line with this topical topic, this article solves the problem of forming an investment model of economic growth that combines into a single structure: growth goals, investment objectives, industries-locomotives of growth, factor conditions and regulatory influences. At the same time, industry is put at the forefront. Here the approach proposed by us in ^[8] is further developed. Proposals are made to fill in the hierarchy levels using the example of Russia. The main focus is on the manufacturing industry. When filling in the levels, new realities associated with increased sanctions pressure on Russia from "unfriendly" countries are taken into account.

Investment model as a five-level hierarchical structure

Within the framework of the developed approach, the investment model of economic growth is formed as a five-level hierarchical structure connecting: growth goals, investment objectives, growth-driving industries, factor conditions and regulatory influences (see Fig. 1).

Fig. 1. The investment model of economic growth as a five-level hierarchical structure on the example of industry.

Source: author's development.

The hierarchy levels shown in Figure 1 can be briefly described as follows:

(1) Target level.

(2) Task level.

(3) Industry level.

(4) Factor level.

(5) Regulatory level.

Let's take a closer look at filling in some of these levels. At the same time, we focus on the Russian manufacturing industry.

Target level of the model

The target level is located at the top of the hierarchical structure being formed (see Figure 1). It is intended for national economic growth goals.

In Russia, current national goals are formulated in the latest Decree of the President of the Russian Federation on national goals (Decree of the President of the Russian Federation No. 474 of July 21, 2020). The group of goals "Decent, efficient work and successful entrepreneurship" is directly related to the manufacturing industry. In its meaning, it corresponds to the eighth group of Sustainable Development Goals "Decent work and economic growth" from the UN List ^[9].

In the considered group of goals from the Decree of the President of the Russian Federation, we have identified three key goals affecting: exports, investments and GDP.

Goal 1. GDP growth is above the global average.

Goal 2. Growth of investments in fixed assets (buildings and structures, machinery and equipment, R&D, etc.).

Goal 3. The growth of exports of non-primary non-energy goods. Their production and export are provided by the manufacturing industry.

Against the background of today's external sanctions by "unfriendly" countries, another goal is being actualized.

Goal 4. The growth of import substitution in manufacturing industries critical for national technological security against the background of today's sanctions pressure.

The goals of economic growth are considered as the main guidelines for filling in the remaining levels of the structural-hierarchical model.

Task level

The task level is located in the hierarchical structure being formed in Figure 1 directly below the target level. It includes four interrelated tasks aimed at achieving national economic growth goals. Taking into account the investment specifics of the model, these tasks are formulated in terms of "investment" and "supply and demand".

Let's focus on these tasks in relation to Russia.

The first task is to increase the demand of manufacturing enterprises for investment goods, or investment goods (new machinery and equipment, modern construction materials, etc.).

The second task is to increase the supply of investment goods that are competitive in the domestic and foreign markets. Here, the leading role can be assigned to the machine-building complex as a fund-forming sector of the manufacturing industry.

The third task is to increase the demand of manufacturing enterprises for investments in fixed assets.

The fourth task is to provide manufacturing enterprises with sources of investment in fixed assets. In fact, we are talking about the task of increasing the supply of investments for simple and expanded reproduction of the fixed capital of manufacturing enterprises.

In solving these tasks, special attention should be paid to investments in manufacturing industries that are critical for Russia's national technological security against the background of today's sanctions pressure.

The four tasks at this level of the hierarchy will be referred to as investment tasks for brevity. They serve as guidelines for identifying industries that are engines of growth at the next level of the hierarchy.

Industry level of the model

The industry level is located in the hierarchical structure being formed in Figure 1 directly below the level of investment objectives. It is intended for industries capable of performing the functions of "locomotives" of economic growth.

It should be noted that Russian and foreign sources distinguish different industries that can play the role of locomotives or drivers of growth. Some studies consider the potential of energy industries as drivers of economic growth ^[10-12]. In ^[13-15], as a source of economic growth, the branch of information and communication technologies is studied, which can create a significant cumulative effect in the economy. In a number of studies, the role of a growth driver is assigned to high-tech industries ^[16-17]. At the same time, in the study ^[18], taking into account foreign experience, a list of potential growth drivers of high-tech companies is compiled: exports of products, intangible assets, access to venture financing, etc. In continuation of this research vector, we will highlight the industries that are the locomotives of growth in relation to the Russian manufacturing industry.

The locomotive industries of economic growth are considered further in relation to the investment objectives of the previous level. When identifying locomotive industries in relation to a specific task, the following are taken into account: (1) the direct contribution of the industry to its solution; (2) the stimulating effect of this industry on the solution of other investment tasks.

Below we will focus on two tasks: the growth of demand and the growth of supply of investment goods. As already mentioned, we will single out the industries that are the locomotives of growth in relation to the Russian manufacturing industry. Among them, we will identify potential locomotives of demand growth and locomotives of supply growth of investment goods. At the same time, we will take into account the medium-term forecast estimates of the Ministry of Economic Development of the Russian Federation, taking into account the impact of sanctions on the Russian economy.

Industries are the locomotives of growth (using the example of the Russian manufacturing industry). In the official forecasts of the Ministry of Economic Development of the Russian Federation, the growth leaders in the forecast period are considered to be the locomotive industries or growth driver industries: the industries from which the greatest relative increase in production volumes can be expected for the period under review. Before the unprecedented sanctions of 2022, such leaders and locomotives of growth included export-oriented manufacturing industries: chemical, metallurgical and machine-building complex, as well as food industry and woodworking (Forecast of socio-economic development of the Russian Federation for the period up to 2024).

When identifying the industries that are the engines of growth, we will be based on the approach of the Ministry of Economic Development of the Russian Federation, the essence of which can be interpreted as follows. The growth-leading industries will "pull out" the growth of the economy in the medium and long term, both due to direct contribution and due to concomitant effects. The direct contribution is expressed in an increase in the output of the leading industries in comparison with the previous period. Concomitant effects can manifest themselves in the growth of the economy due to the stimulating effect of growth leaders on the growth of production in related related industries.

In terms of output growth in the near future, we can agree with the opinion of the author of the work ^[19]: in the short term, we should expect not so much an immediate increase in production, and especially exports, as stabilization and adaptation of industries subjected to unprecedented sanctions. Considering the medium- and long-term perspective, against the background of sanctions pressure, it is more realistic to keep in mind potential growth locomotives. Potential locomotives or growth drivers are considered in various works ^[20-22]. It means that some objects, for example, industries, have the potential to become engines of economic growth in the medium and long term. The realization of potential in practice will depend on factor conditions and measures of state support.

Table 1 shows the production indices in some branches of the Russian manufacturing industry. This does not include mechanical engineering, which will be considered separately. It can be seen from the table data that unprecedented sanctions pressure negatively affected the production indices of the growth-leading industries. In the manufacturing industry as a whole, the production index decreased from 107.4% in 2021 to 98.7% in 2022. It fell the most in woodworking (from 111.9% in 2021 to 87.5% in 2022).

Table 1. Production indices in a number of branches of the Russian manufacturing industry, in % yoy.

Source: calculated according to data ^[23-24] and the source (Forecast of socio-economic development of the Russian Federation for 2023 and for the planning period of 2024 and 2025 (September 2022)).

Table 1 shows that despite the decline in the production index in 2022 (compared to 2021), its value remained above 100%, which affected the medium-term forecast estimates. According to these estimates of the production index (in 2025 in relation to 2021), the number of industries leading the growth were:

- pharmaceutical industry (136.9%);

- industry of production of finished metal products (112.9%);

- industry of production of chemicals and chemical products (105.0%);

- food industry (104.6%).

Taking into account the approach of the Ministry of Economic Development, the selected leading industries can be attributed to the locomotives of economic growth, "pulling" it in the forecast period due to primary and secondary effects.

Industries are the locomotives of the growth of demand for investment goods (on the example of the Russian manufacturing industry). The industries that act as leaders and locomotives of production growth were highlighted above (see table 1). We will refer these industries to potential locomotives of growth in demand for investment goods.

Firstly, such industries will "pull out" the growth of demand for investment goods in the medium and long term by directly contributing to it. The increase in demand for investment goods from the leading industries of production growth is due to the need for:

- compensate for the increased physical depreciation of fixed assets caused by the increase in output;

- constantly modernize the production and technological base for the sustainability of the positive dynamics of the growth of production of products in demand by the market.

The growth of effective demand for investment goods may be delayed, but, being conditioned by objective necessity, it should manifest itself at least in the medium or long term. And here, measures of state support for investment demand can have a positive impact, for example, when purchasing equipment by Russian companies with state participation.

Secondly, by presenting additional demand for investment goods, the leading industries will have a stimulating effect on the manufacturer. By opening a window of opportunity for the sale of additional investment products, such industries generate incentives for the growth of its supply – solving the second task of the investment model.

Industries are the locomotives of the growth of the supply of investment goods (on the example of mechanical engineering). Discussing the task of expanding the supply of competitive investment goods, we will focus on mechanical engineering as a fund-forming sector of the economy. In accordance with the methodology of Rosstat, this sector, along with construction, is a key supplier of investment goods (Rosstat Order No. 635 dated 06.11.2014 (ed. dated 12/28/2016).

Table 2 shows the indices of production in the branches of mechanical engineering. It can be seen from the table data that unprecedented sanctions pressure negatively affected the production indices of the leading engineering industries. The production index for mechanical engineering as a whole decreased from 111.8% in 2021 to 91.4% in 2022.

Table 2. Indices of production in the branches of mechanical engineering, in % yoy.

Source: calculated according to data ^[23-24] and the source (Forecast of socio-economic development of the Russian Federation for 2023 and for the planning period of 2024 and 2025 (September 2022)).

Table 2 shows that despite the decline in the production index in 2022 (compared to 2021), its value remained above 100%, which affected the medium-term forecast estimates. According to these estimates of the production index (in 2025 in relation to 2021), the leading branches of mechanical engineering were:

- production of machinery and equipment not included in other groupings (111.7%); covers the production of lifting and transport equipment, machinery and equipment for agriculture, metalworking machines, etc.

- production of other vehicles and equipment (109.9%); covers aircraft and shipbuilding, production of railway transport, etc.

- production of computers, electronic and optical products (109.2%).

In the forecast period, the selected leading industries are the locomotives of economic growth, "pulling" it due to the direct contribution and secondary concomitant effects.

At the same time, they can be attributed to potential engines of growth in the supply of investment goods for the following reasons. First of all, they will "pull out" the growth in the supply of investment goods due to additional output compared to the previous period. In addition, the increase in the supply of competitive engineering products stimulates demand for it, which is shown in a number of studies ^[25-27]. At the same time, the factors on which the competitiveness of products and the stimulating effect on demand depend are highlighted, including the price and quality of goods, constant updating and expansion of the product range, effective organization of the sales system.

Improving Russia's position in the rating of economic complexity as an additional criterion in assessing the potential of locomotive industries. When determining industries that can become engines of economic growth, the Economic Complexity Index (ECI), developed by a group of researchers, is also of interest ^[28-29]. Within the framework of this approach, which is becoming increasingly popular in assessing the prospects for economic growth ^[30-31], a measure of the economic complexity of countries is determined. The economy of a country exporting many different types of technologically complex products is considered difficult. The most difficult ones include, first of all, the products of high-tech and medium-high-tech industries: electronics, aircraft and automotive, some chemical industries, etc.

Based on ECI, it is shown that the dynamic stability of the economy is correlated with its complexity. Countries exporting a variety of high-tech goods, including electronics, automobiles and chemicals, are more likely to be able to ensure sustainable growth ^{[29, 32-34]}. The role of the high-tech sector as a driver and marker of sustainable growth is considered in a number of works ^[35-38], including the investment attractiveness of high-tech companies ^[39]. At the same time, the work ^[38] explores the role of development institutions in realizing the growth potential of this sector of the economy.

With that said, we will consider the "improvement of Russia's position in the rating of economic complexity" as an additional criterion when assessing the potential of locomotive industries. In accordance with this criterion, the locomotive industries we have identified should be divided into two blocks.

The first block covers low- and medium-tech production. This includes the following industries-locomotives:

- production of finished metal products, except machinery and equipment (OKVED2 code 25);

- food industry (OKVED2 code 10).

This group of locomotive industries produces and exports insufficiently complex products. Accordingly, it has little potential to "improve Russia's position in the ranking of economic complexity."

The second block covers high-tech and medium-high-tech production. These are the industries-locomotives related to:

- to the chemical complex (codes 20 and 21 according to OKVED2);

- to the machine-building complex (codes 26, 28 and 30 according to OKVED2).

The considered group of locomotive industries produces and exports technologically complex and knowledge-intensive products. Accordingly, it has the potential to "improve Russia's position in the ranking of economic complexity." By expanding the product range and diversifying the export baskets of these locomotive industries, Russia will be able to gain additional competitive advantages in maintaining positive dynamics of macroeconomic growth. In other words, in comparison with the first block of the industry, locomotives belonging to the chemical and machine-building complex have an additional potential for a positive impact on macroeconomic growth, which is due to the complexity of the products produced.

The realization of the industry's growth potential will depend on a combination of external and internal factors. Among them are such purposefully formed factors as anti-sanctions measures of industrial policy designed to accelerate the adaptation of enterprises to sanctions challenges.

Factor level of the model

The fourth level of the hierarchy is assigned in the investment model for factors affecting the activation of the sectoral potential of economic growth.

With regard to Russia, it is advisable to focus on the realities of sanctions. These realities give rise to problems that require neutralizing regulatory influences from the state. Also, in the context of sanctions, it is necessary to identify new opportunities for activating the industry potential as an alternative to those pre-sanctions solutions that have become difficult to access today.

Negative factors that have arisen against the background of sanctions and the departure of foreign companies. Sanctions and the subsequent withdrawal of foreign companies from Russia are associated with a number of derivative negative factors affecting the activation of the sectoral potential of economic growth. From the point of view of assessing the significance of these negative factors, targeted surveys reflecting the opinion of Russian business deserve attention.

Figure 2 shows the results of the November round of the targeted survey "The RSPP Business Environment Index". Here are estimates of the significance of negative factors associated with sanctions. 55 Russian companies were surveyed, most of which (70.4%) belong to industries. At the same time, the majority of respondents (83.3%) were representatives of large businesses.

Figure 2 – Results of a survey (conducted by the RSPP in November 2022) on the significance of negative factors related to the sanctions of 2022 and the reduction of the activities of foreign companies in Russia.

Source: ^[40].

Based on the results of the survey of Russian companies shown in Figure 2, we can conclude the following. Against the background of external sanctions, such a negative factor as an increase in prices for imported raw materials and components, as well as equipment, has become the most significant (for 64.6% of Russian companies). Almost half of the surveyed companies (48.9%) considered such a negative factor as a decrease in the availability of loans associated with sanctions to be significant. The third place in importance (35.4% of business representatives were noted) was taken by the factor of reducing the volume of investments. For almost a third of respondents (29.2%), the negative consequence of the sanctions was the problem of equipping the enterprise with new equipment and using new technologies due to import restrictions. Almost one fifth of the surveyed companies (18.8%) referred to difficulties in working with recipients of products that arose against the background of sanctions.

Positive factors (opportunities and incentives) that have arisen against the background of sanctions and the departure of foreign companies. Sanctions and the subsequent withdrawal of foreign companies from Russia are associated not only with negative, but also with some positive factors: opportunities and incentives to activate the sectoral potential of economic growth. In fact, there is a dual nature of sanctions, noted, for example, in ^[41].

From the point of view of assessing the significance of positive factors related to sanctions and the subsequent departure of foreign companies from Russia, targeted business surveys deserve attention here. Such a survey was conducted by the HSE from August to November 2022. It was attended by 1,860 manufacturing enterprises. Among them are large companies, as well as medium and small businesses.

According to the results of this survey ^[42], it can be concluded that the consequence of sanctions and the subsequent departure of foreign companies were not only negative, but also some positive factors. These factors, highlighted by respondents less often than negative ones, nevertheless, it is legitimate to regard as opportunities and incentives for activating the potential of a number of Russian companies. This includes three factors that have become significant, mainly for large businesses:

- the possibility of increasing the share in traditional sales markets (9% of companies were allocated);

- the opportunity to master the vacant market "niches" by expanding the product range (7% of companies allocated);

- the opportunity to enter new sales markets for themselves (6% of companies were allocated).

Some companies (especially small and medium-sized businesses) considered it important to attract qualified personnel (4% of companies were singled out).

All these factors that hinder or contribute to the activation of the sectoral potential of economic growth must be taken into account when choosing key regulatory means of industrial policy, considered at the next level of the investment model.

Regulatory level of the model

The lower level of the hierarchy is intended in the investment model for the key means of influencing industrial policy. This includes both industry-specific and system-wide regulatory tools.

Turning to Russian practice, we also focus on the sanctions aspects here. Let's focus on the financial and investment measures of state support demanded by Russian business in the conditions of sanctions. We also focus on the industry support areas that are critical today from the standpoint of Russia's technological security.

Financial and investment measures of state support demanded by Russian business in the conditions of sanctions. From the point of view of assessing the significance of the financial and investment measures of state support undertaken today, targeted surveys reflecting the opinion of Russian business deserve attention.

Figure 3 shows the results of the above-mentioned November round of the targeted survey "RSPP Business Environment Index". Here are estimates of the importance of financial and investment measures of state support in the conditions of sanctions.

Figure 3 – Results of a survey (conducted by the RSPP in November 2022) on the importance of financial and investment measures of state support in the face of sanctions.

Source: ^[40].

Based on the results of the survey of Russian companies shown in Figure 3, we can conclude the following. Against the background of sanctions of "unfriendly" countries, such state support measures as programs for subsidizing investment projects, modernization and reconstruction of production have become the most popular (for 75% of Russian companies). More than half of the surveyed companies found the most in demand: state support of loans (62.5% of companies) and fiscal relief (55% of companies). At the same time, half of the respondents are interested in the fact that the property tax benefit extends to the increase in value during modernization and reconstruction. A little less than half of the surveyed companies note the importance of legislative registration of benefits and preferences provided for the implementation of large-scale investment projects. For one third of respondents, under the conditions of sanctions, state guarantees for investment projects turned out to be in demand.

Based on the above estimates, it can be concluded that a number of financial and investment regulatory measures (subsidizing investment projects, state support for loans, tax benefits, etc.) are most in demand by Russian business under sanctions.

Areas of industry support that are critical from the standpoint of Russia's technological security. In terms of technological security and uninterrupted operation of Russian enterprises under sanctions, it is important to provide financial and investment support to those industries where dependence on imported components is particularly critical.

Such industries were identified during strategic sessions held under the leadership of the Chairman of the Government of the Russian Federation M. Mishustin ^[43].

In the chemical industry , the following are highlighted:

- pharmaceuticals, where localization of substances used in the production of vital medicines is necessary;

- low- and medium-tonnage chemicals; demand for these products is met mainly through imports, and dependence on it for many strategically important products reaches 100%.

In the machine - building complex are allocated:

- transport engineering, where domestic production of high-power diesel engines is relevant;

- automotive industry, where the development of a universal component base (gearboxes, drives, etc.) is required.;

- shipbuilding;

- aircraft industry, where it is planned to significantly replenish the fleet of Russian airlines with new aircraft of domestic production;

- radio electronics; subsidized loans are relevant here for the development of electronic component base and its components, electronic and radio-electronic equipment, telecommunications equipment, special technological equipment and intelligent control systems, automotive electronics, medical equipment, etc.

It is advisable to focus financial and investment support primarily on overcoming the critical dependence on imported components in the listed branches of the chemical and machine-building complex. The provision of additional funds and opportunities by the state will contribute to the stabilization and acceleration of the growth of the industries under consideration, as well as the recovery of some of them from the crisis under the conditions of sanctions pressure.

Conclusions and conclusion

Summarizing the above, we can conclude the following.

A structural-hierarchical approach to the investment model of economic growth has been developed. Within the framework of the developed approach, the investment model is positioned as a 5-level hierarchical structure that combines into a single structure: growth goals, investment objectives, industries-locomotives of growth, factor conditions and regulatory influences.

The starting point of the structural-hierarchical model is the target level, which sets the guidelines for filling the remaining levels. The level located directly below it includes tasks focused on achieving the goals of the top level.  Taking into account the specifics of the investment model, these tasks are formulated in terms of "investment" and "supply and demand". The third level of the hierarchy is intended for industries-locomotives of growth, which should be specified in relation to the tasks of the previous level. The fourth level of the hierarchy is reserved for multidirectional factors affecting the activation of the sectoral potential of economic growth. Regulatory means of industrial policy impact on economic growth (measures, tools, mechanisms) should be displayed at the lower level of the hierarchy both system-wide and industry-specific.

The possibilities of filling in the hierarchy levels on the example of Russia are shown. The main attention is paid to the Russian manufacturing industry. Today's sanctions realities are taken into account. When filling in the industry level, it is concluded that it is advisable to take into account the index of economic complexity as an additional criterion for identifying industries-locomotives of growth. When filling in the factor level, the dual nature of anti-Russian sanctions is shown, which, along with negative factors, also generate certain business opportunities. When filling out the regulatory level, a number of financial and investment measures (subsidizing investment projects, state support for loans, tax incentives) were identified that are in demand by Russian business under sanctions.

The proposed approach to the investment model of growth will be useful for information and analytical support of industrial policy. It will help to streamline the basic components of decision-making (goals, objectives, locomotives of growth, negative and positive factors, regulatory influences) within a single structure, taking into account cause-and-effect relationships.