Economic growth is one of the key indicators of a healthy economy. It refers to the rise in the value of goods and services produced by the economy over some time, while economic development is the broader concept and includes getting the complete well-being, health and energy levels of the general populace enhanced. The rise in capital goods, human capital, and technology become part of the growth. There is a shift in the production volume process due to the rapid changes in the technological ecosystem in developing economies.
Economic goods are limited and scarce regarding their demand, and hence, the goods and services produced through the involvement of human efforts for a solution to a particular problem. Apart from basic facilities such as sanitation, electricity, water, there are other goods and services accessible to people.
For economic development, there is the qualitative advancement in the lives of the country’s citizens, assessed by the Human Development Index (HDI). The overall development of a nation depends on various factors, namely standard of living, job opportunities, technological improvements, per capita income, quality of life, GDP, industrial and infrastructural development and more self-esteem needs.
The growth can be measured when there is a rise in the aggregate market value of additional goods and services produced by applying economic concepts like GDP and GNP. It relies on an increase in people’s real income, which means the ratio between people’s income and the prices of what they can procure is widening.
It has a multi-dimensional approach that involves an increase in money income and improvement in social activities like education, public health, greater leisure, etc. Changes in per capita real income cannot measure such improvements. People step forward to the cycle of growth when the goods and services become more affordable leading to expansion in opportunities.
“Total income is a more appropriate concept to measure welfare than income per capita.” Therefore, in measurable economic development, the most appropriate measure will be to include final goods and services produced. However, we must allow for the wastage of machinery and other capital goods during the process of production,” said Professor Me de.
Following are some of the factors of economic growth
- Physical Capital: A rise in investment in physical capital, namely machinery, factories, machinery, and roads, will reduce the cost of economic activity. Efficient factories and machinery result better than physical labour leading to excellent outcomes. For instance, a powerful highway system can lower inefficiencies in shifting raw materials or goods across the country, affecting its GDP.
- Natural Resources: The varied natural resources such as mineral, oil or deposits may enhance economic growth as this shifts or increases the country’s PPC (Production Possibility Curve). Other resources consist of water, land, natural gas and forests. For instance, Saudi Arabia’s economy has already been reliant on its oil deposits.
- Labor: A population scaling on the next level signifies an increase in the existence of numerous workers or employees, which means a higher workforce. However, a downside of an overall large population is that it could result in higher unemployment.
Challenges of economic growth
- The poor state of health and education: People, who can’t visit healthcare or education, don’t have productivity. The lack of access to it implies the labour force is not as suitable as it could be. Hence, the economy does not produce outcomes as it could have been.
- Infrastructure quality: Developing economies endure insufficient infrastructure capability with low-quality material on sites like schools, roads and hospitals. It enables transportation dearer and gradually decreases the whole efficiency of the nation.