Q.1 Examine the role of
economic factors in economic development.
Determinants of Economic Growth
Determinants of economic growth are
inter-related factors that directly influence the rate of economic growth i.e.
increase in real GDP of an economy. There are six major determinants of growth.
Four of these are typically grouped under supply factors which include natural
resources, human resources, capital goods and technology. The other two are
demand and efficiency factors.
Supply Factors
These factors affect the value of goods and
services supplied in an economy.
Natural Resources: Natural resources
include anything that exists in nature and which has exploitable economic
value. Rate of economic growth increases on increase in quantity and quality of
natural resources. Examples of natural resources which can have major effect on
rate of economic growth include fossil fuels, valuable metals, oceans, and wild
life.
Human Resources: Human resources
include both skilled and unskilled workforce. Increase in the quantity and
quality of the workforce increases rate of economic growth. Here, increase in
quality refers to improvement of skills the workers possess. When more people
work, more goods and services are produced and when more skilled workers do a
job, they produce high value goods and services.
Capital Goods: Capital goods are
tangible assets such as plant and machinery that can carry out processes which
result in the production of other goods and services. Capital goods require big
investments initially but they increase production and growth rate in future
periods.
Technology: Technology
includes methods and procedures used to produce various goods and services. New
technology may be invented or current technology may be improved gradually by
investing in research. Better techniques once devised, allow faster production
and increase rate of economic growth.
Demand Factor
The increased supply of
goods and services caused by the supply factors must be sustained by increased
demand for goods and services in the economy.
Efficiency Factor
Achieving high output to input ratio is the
result of efficiency. Efficiency includes both productive and allocative
efficiency. High efficiency increases growth rate when it is coupled with full
employment. To achieve maximum growth rate, an economy must use its available
resources in the least costly way to produce the optimum mix of goods and
services and it must use its resources to the maximum extent possible.
Q.2 What are the main reasons of shift in focus
from economic growth to human development?
The experience of the developing countries during
the sixties and seventies showed that whereas target rates of economic growth
were in fact achieved trickle-down effect in the form of creation of more
employment opportunities, rise in wages and improvement in income distribution
did not operate.
The problems of poverty, unemployment and income
inequality further worsened instead of getting reduced during the process of
growth in the Fifties and Sixties in the developing countries. For instance, in
India Dandekar and Rath found that 40 per cent of rural population in India
lived below the poverty line in 1968-69.
Thus, due to the failure of traditional
strategies of development in solving the problems of poverty, unemployment and
inequality, it was realised in the seventies that the concept of development
should be broadened so that it should signify that well-being of the people has
increased.
This led to the view that economic development
should not be judged on the basis of growth in GNP alone. Economic development
will take place in true terms only if the poor people are raised above the
poverty line. Late Prof. Sukhamoy Chakravarty rightly writes, “The rate of
growth strategy is by itself an inadequate device to deal with the problems of
generating employment opportunities and for reducing economic disparities. Much
depends on the composition of the growth process and how growth is financed and
how benefits from growth process are distributed.”
It is worth mentioning that there is no
guarantee that when there is increase in GNP, employment will also increase. It
can happen that with the use of more capital-intensive technique while
production may be increasing at a rapid rate, employment may be falling
instead of rising.
According to the modern perception of economic
development, rapid increase in GNP secured through displacing labour by
machines and thus causing rise in unemployment and under-employment cannot be
called true economic development. Professor Dudley Seers makes the meaning of
economic development according to the new perception in the following words:
“The questions to ask about a country’s
development are therefore: What has been happening to poverty? What has been
happening to unemployment? What has been happening to inequality? If all three
of these have declined from high levels, then beyond doubt this has been a
period of development for the country concerned. If one or two of these central
problems have been growing worse, especially if all three have, it would be
strange to call the result development even if per capita income doubled.”
Recently, the concept of economic development
has been further widened so that it now involves not only reduction in poverty,
inequality and unemployment but also requires improvement in quality of life
which includes cleaner environment, better education, good health and
nutrition.
Thus World Development Report 1991, published by
World Bank asserts: “the challenge of development is to improve the quality of
life, especially in the world’s poor countries, a better quality of life
generally calls for higher incomes but it involves much more. It encompasses as
ends in themselves better education, higher standards of health and nutrition,
less poverty, a cleaner environment, more equality of opportunity “Thus the
concept of economic development has been greatly broadened.
Today economic development is interpreted as not
only in more growth in Gross Domestic Product (GDP) but also in terms of good
quality of life which, according to Prof. Amartya Sen, consists in enlargement
of opportunities for people and freedom of human choices’. This new concept of
development includes achievement of freedom from servitude to ignorance and
illiteracy. It also includes enjoyment of human rights. Thus United Nations
‘Human Development Report’ of 1994 in the writing of which Prof. Amartya Sen
made a significant contribution, asserts, “Human beings are born with certain
potential capabilities.
On the basis of various ingredients of good
quality of life and other criteria such as enlargement of human choices and
freedom a human development index is prepared by United Nations Development
Programme (UNDP). This human development index is considered as a better
indicator of economic development index.
***
No comments:
Post a Comment