FACTORS PROMOTING ECONOMIC DEVELOPMENT.pptx

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1. FACTORS PROMOTING ECONOMIC DEVELOPMENT

2. WHAT IS A FACTOR? A factor is one one that actively contributes to the production of a result. The determinants of economic growth are inter related factors influencing growth rate of an economy. Economic growth is a function of multiple socio-economic variables .

3. ECONOMIC FACTORS PROMOTING DEVELOPMENT Capital formation and ICOR Natural resources Agrarian structure Marketable surplus of agriculture Industrial structure Structural changes Organisation Foreign trade Technology Division of labour Economic system

4. NON ECONOMIC FACTORS PROMOTING DEVELOPMENT Human resources Political and administration factors Social factors Changes in attitude Since the economic development can’t be achieved successfully within duration of one year, it requires combination of various factors for development. There are mainly two factor of development. Both the economic and non economic factors play an important role in development.

5. ECONOMIC FACTORS Economic factors are factors that affect economy. Every country has set of characteristics such as natural resources that can influence their ability to build economy known as economic factors or conditions of economic environment within a country that influence capacity to further develop economy. The stock of capital accumulation in most cases settle question whether at certain point of time county will be able to grow at faster or slower level.

6. CAPITAL FORMATION I n the factors of production i.e land, labour , capital, entrepreneur and technology. Capital plays an essential role to produce output. Without capital, production is impossible. Capital means wealth or money in form assets which yield income. Eg : land, building. Capital is divided into working, real, fixed physical and human Capital. Real capita! refers to physical goods that exist in production of other goods. EXAMPLE : Tools, Equipment, Machinery.

7. When country’s capital grows, production expands and country gets richer. Capital factor is now universally admitted that country which wants to accelerate the pace of growth has no choice, but to save high ratio of income. If there are more savings, there is more capital Economists State that, lack of capital. is principal hindrance in process of development and no development plan will success unless proper supply of capital is not being done. Capital helps in shaping country in proper way in terms of economic development.

8. When capital stock increases with time, it is called economic development with capital formation. When there is more capital, country can attract foreign investment on large scale. Every economic system should maintain minimum rate of capital accumulation. Capital output ratio is amount of capital needed to produce one unit of output. The Investment Capital Output Ratio [ICOR] refers to additional amount of capital required to produce additional unit of output. Capital formation depends upon mobilization of savings, which relies on people who want to save.

9. B. NATURAL RESOURCES Natural resources are physical resources naturally available within available within a country. It includes coal, oil, minerals. Natural resources are important for rapid development. Availability of natural resources are essential for economic growth to take place. A country deficient in these resources may not develop rapidly. Along with availability of resources, efficient utilization of there resources are must for development to take place.

10. “OTHER THINGS BEING EQUAL, MEN CAN MAKE BETTER USE OF RICH RESOURCES THEN THEY CAN OF POOR” – W.A.LEWIS Natural resources can be developed through improved technology and increase in knowledge. What is required is their proper exploitation through improved techniques so that there is little wastage. In less developed countries, natural resources are either unutilized, under-utilized or mis-utilized, This is one of the reasons of their backwardness. This is due to economic backwardness and lack of technological progress.

11. C. AGRARIAN STRUCTURE Agriculture has been a backbone of our country from many ages. It plays very important role because it not only contribute a greater percentage of national income but also provides employment to lot of people who come from rural area. Agriculture is the only source of rural livelihood. Method of cultivation is not only the factor which is taken into consideration but also includes ownership of land from view of economy .

12. D . MARKETABLE SURPLUS OF AGRICULTURE Marketable surplus represents surplus of harvest that can be sold for profit after farmer sells their crop. This is the only livelihood of population. It is an indicator of progress in agricultural sector Enhanced productivity and production in agriculture and vital for development. Rise in urban population leads to increase in demand for agricultural products. Demand for grains increases. If not met would result in scarcity of food. Food shortage would force a country to import food grain which would affect balance of payments position. Ex: India faced this situation in 1976-77.

13. To prevent this situation, every country should also focus on in its agricultural sector which indirectly increase pace of industrialization.

14. The importance of the marketable surplus in a developing economy emanates from the fact that the urban industrial population subsists on it. With the development of an economy. the ratio of the urban population increases. As a result demand increases for food grains. This demand must be met adequately; otherwise the consequent scarcity of food in urban areas will arrest the economic growth. If some country wants to step-up the pace of industrialization, it must not allow its agriculture to lag behind. The supply of the farm products particularly food grains must increase, as the setting-up of industries in cities attracts a steady flow of population from the countryside.

15. E. INDUSTRIAL STRUCTURE In the sectors of economy, Industrial sector is of great importance in development of country. It is a proven fact that county with strong industrial sector have shown more economic growth and had improved national income and promoted living standard of people. If industrial sector employs more people, then there would be no poverty. This can be achieved by giving importance to large scale, small scale and cottage industries. Industries should use modem level of technology which lead to high development rate and should adopt capital intensive techniques.

16. F. STRUCTURAL CHANGES It is the dramatic shift in a way country or industry or market operates. It is transformation from traditional agricultural society to modern industrial society. It is a radical transformation. It is, a constant process as economy adjusts to change in pattern of demand. "In every progressive economy, there has been a steady shift of employment and investment from essential primary activities to secondary activities of all kinds to assign greater extent into tertiary production”.

17. G. ORGANISATION In the factors of production, entrepreneur plays a key role. Entrepreneur is a person who set ups business and arranges all factors of production, bearing most of risk and enjoying most of reward and earning a profit in doing all this. He is seen as an innovator or source of ideas. LESS DEVELOPED COUNTRIES LACK ENTRREPRENEUR SKILLS

18. H. TECHNOLOGICAL PROGRESS Technology refers to process though which inputs are transformed into outputs. Technological progress refers to discovery of new is improved methods of producing goods. Technology relates to new research. Country should spend high percentage on R &D. It helps country to produce more through better technology. CHANGE IN TECHNOLOGY Increase in productivity of labour or capital production factors “ INNOVATION IS IMPORTANT TECHNOLOGICAL FACTOR IN ECONOMIC GROWTH” - SCHUMPETER AND KUZNETS

19. DIVISION OF LABOUR Adam Smith gave much importance to division of labour . Division of labour is important feature of modern industrial organization. It refers to scheme of dividing given activity among workers in such a way that each worker is supposed to do one activity. Division of labour increases output per worker on account of higher efficiency and specalized skill. SPECIALISATION DIVISION OF LABOUR INCREASE IN PRODUCTIVITY Increase in rate of development LARGE SCALE PRODUTION Greater specialization and division of labour

20. J. FOREIGN TRADE Exports and Imports of goods i.e trading activity outside the jurisdiction limits of country is called foreign trade. Foreign trade of a country should be minimum of imports and maximum of exports. There should be foreign investment for high rate of economic development of nation. A country should aim to become self-reliant. Instead of depending on products of other nations, we can set up the manufacturing of other products by encouraging development of setting up Industries and also saves money. Foreign trade has proved to be beneficial to countries which have been able to set up industries in relatively short period. JAPAN AND SOUTH KOREA – Captured international market for industrial products.

21. K. ECONOMIC SYSTEM Economic system of a nation also affects economic development. In previous time, country followed laissez faire (no government intervention) which maximized economic progress. Every country needs a system to determine how to use its productive resources. An economic system is a system which deals with production, distribution and consumption of goods and services in particular society. It is composed of people, institutions and their relationships.

22. System in which individuals own and operate factors of production. Minimal interventionist role of state System in which government own and operates factors of production and state intervention play great role System combine features of both system

23. REAL FACT SOCIALIST ECONOMY – Market mechanism allowed CAPITALIST ECONOMY- State play major role

24. L. OCCUPATIONAL STRUCTURE The distribution of population according to different types of occupation is occupational structure. I t is shift from one sector to another sector.