UNDERSTANDING ECONOMIC GROWTH AND DEVELOPMENT.
In terms of economy, the capacity for production should be maintained, even increased, so that output does not suffer, and foods and services continue to be available in the future. Part of the resources must be invested in maintaining and enlarging capital equipment to meet the demands of a growing population. This is pure economic growth.
FACTORS FOR GROWTH.
The factors that contribute to the economic growth of a country may be described mainly under four heads; natural resources, human resources, capital formation, and technological advances. Besides, there are other factors, such as need to ensure f
ull-capacity utilization and efficient allocation of resources, responsible for growth. While this is a general list, there is a special need for an appropriate institutional environment to enable the growth process to proceed smoothly and quickly. The way each one of the factors and considerations contributes to growth may be described as follows:
Natural Resources- comprises climate, soil, rainfall, mineral deposits, and sources of power. These provide the natural base and constitute the fundamental factor in the capacity of a country to grow. Natural resources can be augmented by international trade. However, all resources are not tradeable. There are resources which can be renewed with proper conservation practices (arable land, pasture land limber land etc.) there are resources that can be added by new discoveries and efficient acquisition. Natural resources are thru flexible in supplies, despite their fixity or scarcity.
Human Resources. The size and quality of labor are of vital importance in determining the productive capacity of an economy. The size is relevant in providing and adequate labor force to work with capital and on natural resources. Generally, a growing size of human resources should be helpful in augmenting economy. However, in each situation, there is an optimum number that ensures the highest average productivity. Beyond that number, a falling marginal product raises the national product of a lower rate, and lowers the average productivity of human resources. Quality of population depends upon its health, vigor, education, training, morale, etc.
Capital formation: the capital stock of a country determines how many laborers of that country are capable of producing. Real capital per worker shows its output capacity, irrespective of the skill of the workers. As such, capital stock is of crucial importance.
Technological Advance. It contributes to the increase in output. New knowledge of production methods gets embodied in new machines and new equipment, capable of producing more or new goods. Capital formation and technical advance are inter-related processes. the development and application of new products or techniques entail investment in new machines and equipment.
Other Factors Besides the above four factors, there are two additional considerations to be kept in view. The first consideration is the need to ensure the full utilization of capacity. Otherwise, national output will be less than what could be possible.
The second consideration is to ensure efficient production through proper allocation of resources. This involves two steps. Once is related to the allocation of resources on the production side of the process of growth. The second step is concerned with the change in economic structure to suit the changing patter of consumption. Growth in economy leads to rise in income. Consequently., the composition of consumer goods undergoes change. Beyond a certain level of income, the proportion of expenditure on food items falls, and that on non-food items such as consumer durables increases. To meet that changing pattern of consumption, structure of consumer industries also changes. Otherwise, production will be less efficient.Share