Economic Growth Meaning:

There are many determinants of economic growth. but before to that let us understand the meaning of economic growth. Economic growth refers to the increase in the amount and quality of goods and services produced by an economy over time. It is usually measured by the growth rate of real Gross Domestic Product (GDP), which is the total value of all goods and services produced in an economy, adjusted for inflation. Economic growth is an important indicator of the economic health and prosperity of a country.

According to Professor J.K. Mehta, however the term growth has quantitative significance. Growth suggests an increase in quantity or volume of something. An increase in country’s population, national income, Per Capita income consumption, saving, investment, foreign trade Etc. over a period.

Determinants of economic growth.

• Natural resources: The first determinant of economic growth is, a country’s economic betterment depends on the growth of national income which basically depends on the endowment of natural resources in the country. Natural resources include land, social, climate, forest, rivers, minerals Etc. without natural resources country cannot developed in all respect.
• Human resources and population growth: Man power or human capital is another main determinant of economic growth. Labor is the most active and productive factor. Labor brings other passive factors into action. It is the man’s efforts which bring fruits land by itself is passive and it will grow grass only but man works, land is cultivated.
• Capital formation and capital accumulation: Economic growth is a function of the rate of capital formation in a country an important aspect of economics system is that the productivity of an enterprise is likely to increase as the amount of capital used in the productive processes is increased thus the accumulation of a real capital is the inevitable requisite for development.
• Technology process: Technology advancement is the key factor of economic advancement. Resources can be fruitfully and optimally utilize through a high state of technology what is a productive resources in any area depends upon the technical and industrial sophistication of the people who inhabit it.
• Entrepreneurship: A bold entrepreneurship of Schumpeterian type is very essential for rapid economic progress entrepreneur must innovative rather than trade. Innovation in leads to progress here innovation means commercial application of the scientific inventions.
• Capital output ratio: In technical sense capital output ratio is very significant factor affecting growth rate in economy, since it determines the productivity of capital the relationship between the amount of capital invested and the annual increase in the resulting output is referred as capital output ratio. a low capital output ratio obviously means high productivity of capital.
• Trade and Globalization: Access to international markets allows for larger markets for goods and services, encouraging higher production and efficiency. Inflows of FDI bring in capital, technology, and management expertise, boosting economic growth.
• Social and Cultural Factors: Societal stability and cooperation can enhance economic performance by reducing conflicts and fostering a cooperative economic environment. Cultural attitudes towards entrepreneurship, innovation, and work can influence economic growth.
• Environmental Sustainability: Adoption of environmentally sustainable practices ensures long-term growth by preserving natural resources and reducing environmental degradation. Proactive measures to mitigate and adapt to climate change can prevent economic disruptions.

also read: explain the causes of inflation.