Economic growth is included with economic progress and advancement. The definition of economic growth is that the improvement in the ability and capacity of an economy to manufacture goods and services in a particular period of time.
Economic growth in economies is referred as a long term expansion in the high-yielding potential of the economy to satisfy the wants of individuals in the society. Stable and sustained economic growth of a particular country gives positive results on the national income and in employment levels, which further results in high living standards. In addition to this, it also plays a major role in improving the finances of the government by increasing the tax income. This allows the government to make an extra income for its economical improvement further. The measurement of a country’s economic growth can be done by comparing the year’s Gross National Product (GNP) level with the GNP of the previous year. It is possible for a country to improve its economic growth if the particular country has properly analyzed its economy’s strengths and weaknesses.
Economic analysis provides intuitions into the crucials of economy. This systematic process enables the optimum use of the short supply of the resources and selecting the best possible alternative to reach the economic growth of a country. Furthermore, these economic analysis supports in assessing the roots of multiple economic problems, like economic instability, depression and inflation. Demand, supply, price, production cost, wages, workforce, and capital are the different economic variables that are taken into consideration while performing an economic analysis.
Economic growth which is the positive change in the level of produced goods and services of a country in a particular time frame, has an important and unique characteristic that is never uniform or same in all departments of an economy. For example, in a specific year, the finance sector of a country has contributed significantly in the economic growth whereas the real estate sector has failed to perform well as far as the economic growth of the particular county is concerned.
A country’s economic growth is directly connected to the improvement in Gross National Product (GNP) percentage. In actual sense, economic growth is related to the improvement in the output of per capita or particular country’s net national product that remains constant or sustained for a many number of years.
When a country’s rate of increase in total output is greater than the rate of increase in population, that makes the achievement of economic growth a possible task. As an example, in India, the rate of increase in GNP was 9.1%, while the population growth rate was 1.7% during the period of 2005-2006. In this case, the per capita increase in GNP of India would be 7.4%, which has been calculated by deducting the population growth rate from the GNP growth rate.
However, if a particular country’s GNP rate of increase and population rate of increase were equal, then the actual GNP growth of that country would be zero, which hints that there is a drop in per capita income. Consequently, there would be no economic growth in such an economy. Therefore, in such a situation, even though there is an increase in the total output of the country, the living standards of people would not improve. Nevertheless, this type of growth is better than an economic stagnation.
A country’s economic growth is possibly obstructed by a number of factors, such as trade deficit and expenditure alterations by governmental bodies. In general, the economic growth of a country is harmfully affected when there is a steep rise in the goods and services prices.
Human resource refers as to one of the most important determinants of the economic growth of a country. The growth of the economy can be directly affected by the quality and quantity of its human resources.
The defendant factors of the quality of Human Resource can be listed as the skills, creative abilities, training, and education. If a country’s human resource is highly skilled and well trained, then the output also would be of high quality.
However, low skilled labor of a country hampers economic growth, whereas surplus of labor is of lesser significance to economic growth. Hence, the human resources of a country should be appropriate in number with the required skills and abilities in order to achieve the economic growth.
The influence of natural resources on the growth of a country’s economy is considered as high. Natural resources include all the resources produced by nature either on or beneath the land. On the land natural resources include but not limited to plants and trees, water resources, and even the landscape. Beneath the land natural resources include but not limited to, oil, gas, metals, non-metals, and minerals. The climate and environmental conditions decide the natural resources of a country. Countries that have enough and more natural resources continue to grow than to the counties that have small or less amounts of natural resources.
The efficiency of utilization and taking the advantage of the natural resources of a country depending on the human resource skills and abilities, technological methods, and the availability of funds. If a country has skilled and educated labor forces along with rich natural resources, the combination will lead the economy toward growth. For example, the United States, the United Kingdom, Germany, and France can be taken as such developed economies that efficiently used the combination of human workforce along with efficient utilization of natural resources. Still, there are countries that have high per capita income, but few natural resources, like Saudi Arabia, have their economic growth in a considerably higher position. Equally, one of the most developed economies, Japan is a country that has few natural resources along with a small geographical area, but the country achieves a higher growth rate via blending its efficiently skilled workforce with the renown technological advancements of Japan.
Producing and acquiring man made products like Land, building, machinery, power, transportation, and communicational medium is called capital formation. Availability of capital per worker is increased by the capital formation. When the productivity of labor increases, it results in the increase in output and accordingly a growth of the economy.
Technological development is one of the most important factors that influences the growth of an economy. Applications of scientific methods and production methods and techniques also include the word, technology. On the other hand, the technology is the nature and type of technical instruments used by a certain amount of workforce.
Productivity is improved via technological developments by allowing the maximum use of limited resources. As a comparison, the countries that have focused in the field of technological development grow speedily than the countries that have less focus on technological development. Choosing of the suitable technology also plays a major role for the growth of an economy. Conversely, an ill-suited technology results in high production costs.
Another critical factor in the economic growth of a country is social and political factors. Social factors such as traditions and customs, values and beliefs contribute to the growth of an economy to a certain extent. Likely, the countries that have more conventional beliefs and superstitions, resists the adaptation of modern ways of living. In this case such economical achievement becomes difficult. Some politicians take advantage of these traditions and beliefs to sustain their political powers by confining the people to traditional and superstitious frames to market themselves as traditional leaders to win elections. As an example, a country like Sri Lanka has a number of natural resources despite its small geographical area, but the country remains to be a developing economy for a number of decades due to political factors. Apart from that, political factors such as participation of the government in formulating and implementing various policies for the betterment of the country’s economic stability, play a major part in economic growth.
