It means increase in the market value of the goods &

services produced by an economy over time.

It implies sustained expansion in effective labour force,

capital , volume of internal & external trade and
level of consumption in an economy.

It has been one of the principal objectives of planning

in India.
Economic growth is measurable & objective. Real per
capita income is the most reliable indicator of
economic growth.
Since Independence, India has made significant
progress in several areas of economic &
human development. Food production has
grown to provide adequate level of food
security. Infrastructure development has
proceeded with good speed . A vast pool of
trained human resources has been developed.
A vast network of development institutions
has been nurtured.
Economic growth is a function of multiple socio-economic
variables .These could be considered as factors affecting
economic growth.

Factors affecting economic growth can broadly be classified

into two categories, namely-
 Economic factors – natural resources, human capital, investment in
capital goods & entrepreneurship .
 Non- economic factors- social factors, political factors &
demographic factors.
Natural resources are an important source of national wealth around the
world. Yet, experience shows that natural riches are neither necessary nor
sufficient for economic prosperity and progress. The worlds richest
countries include Hong Kong, Japan, Singapore and Switzerland which do
not owe their national wealth to nature and many others, such as the
United States and the United Kingdom, where natural resources
nowadays play only a minor role in the generation of national income.
 Among developing countries, natural resources are relatively more
prevalent. But there are also clear examples of countries that are genuinely
rich in terms of natural resources but still have not been able to sustain
economic growth. It thus appears that the generosity of nature may
sometimes although by no means always turn out to be a mixed blessing.
If a country doesn’t have much resources, the best way is to put those
limited resources to optimal use.
If natural resource development is properly managed, the associated
revenue can be used to speed up growth, reduce inequality, and lift people
out of poverty.
Human capital is a collection of resources—all the knowledge,
talents, skills, abilities, experience, intelligence, training,
judgment, and wisdom possessed individually and
collectively by individuals in a population. These resources
are the total capacity of the people that represents a form of
wealth which can be directed to accomplish the goals of the
nation or state or a portion thereof.
 NON -ECONOMIC
FACTORS AFFECTING
ECONOMIC GROWTH
Social institutions exert a determining influence on economic progress
& can either help or hinder the progress of a nation.

In underdeveloped economies, social institutions & structure do not

provide proper necessary atmosphere & proper conditions for
scientific growth. The important social institutions in India are- cast
system , joint family system, religious beliefs & customs.

Whereas in developing & developed countries, social institutions &

structure pave a way for successful economic growth . People believe
more in their hard work rather than in their fate. This improves
their performance contributing to economy’s progress.
There are often political factors involved in why some countries
remain poor, and one of those is bad government. Governments
need to do lots of things to encourage development – they need to
build and maintain infrastructure, and raise and spend finance
wisely, on the right projects.
They also need to set up their laws and business practices in a way
that encourages investment and initiative, that protect businesses
and individuals legally, and that honour property rights, contracts
and copyrights.
 People's economic behaviour varies at different stages of life, changes in a
country's age structure can have significant effects on its economic
performance.

 Nations with a high proportion of children are likely to devote a high

proportion of resources to their care, which tends to depress the pace of
economic growth.

 By contrast, if most of a nation's population falls within the working ages,

the added productivity of this group can produce a high level of economic
growth, assuming that policies to take advantage of this are in place. In
fact, the combined effect of this large working-age population and health,
family, labour, financial, and human capital policies can create virtuous
cycles of wealth creation.

 And if a large proportion of a nation's population consists of the elderly,

the effects can be similar to those of a very young population.
To sum up, the factors that are the basic determinants to economic
progress are natural resources, (including land, minerals, water,
forests etc. ) , the quantity & quality of country’s population
(demographic factors ) , the technological innovations ( including
discoveries, inventions etc ) , entrepreneurial skills, social &
institutional factors ,and a stable government and its efficient
working. Favourable external circumstances and prospects of
foreign trade also promote growth.