What Are The Key Factors That Led To The Development Of The Human Service Model?

Factors that Determine Economic Growth and Development of a Country!

The process of economical growth is a highly complex phenomenon and is influenced by numerous and varied factors such as economic, political, social and cultural factors. Information technology is believed by some economists that the capital is the only requirement for growth and therefore the greatest emphasis is laid on upper-case letter formation to bring about economic development. But this is incorrect. As Professor Nurkse rightly remarks, "Economic development has much to practise with human endowments, social attitudes, political conditions and historical accidents. Capital is a necessary just not a sufficient status of progress."

The post-obit are various factors which decide economic growth and development:

(i) Supply of Natural Resource;

(ii) Capital letter form action which depends upon the rate of domestic saving and investment and inflow of foreign majuscule;

(three) Growth of population;

(iv) Technological Progress; and Nosotros examine beneath each of these factors in turn.

(i) Supply of Natural Resources:

The quantity and quality of natural resources play a vital role in the economic development of a country. Important natural resources are state, minerals and oil resource, h2o, forests, climate, etc. The quality of natural resources bachelor in a land puts a limit on the level of output of appurtenances which can be attained.

Without a minimum of natural resources in that location is not much promise for economic development. It should, however, be noted that resource availability is non a necessary status for economical growth. For instance, Republic of india, though rich in natural resources, has remained poor and under-developed.

This is because resources take not been fully utilised for productive purposes. Thus it is not only the availability of natural resources just also the power to bring them into use which determines the growth of an economy. On the other hand, Japan has a relatively few natural resources only has shown a very high rate of economic growth and as a result has become ane of the richest countries in the world.

How has Japan done this miracle? Information technology is international trade that has made possible for Japan to achieve higher growth charge per unit. Nihon imports many of natural resource such as mineral oil it requires for production of manufactured goods. It and so exports manufactured goods to the countries that are rich in natural resource. Thus experience of Japan shows that abundant natural resources are non a necessary condition for economic growth.

Supplies of natural resources can be increased as a effect of new discoveries of resource within a state or technological changes which facilitate discoveries or transform certain previously useless materials into highly useful ones. It should as well be noted that the scarcity of certain natural resources can be overcome by constructed substitutes.

For case, the synthetic rubber is being increasingly used in the place of natural condom in advanced countries. Farther, nylon which is a synthetic substance is being largely used in identify of silk which is a natural substance. The use of natural resource and the role they play in the economical growth depend, amongst other things, on the type of technology. The relationship of resources to the kind and level of engineering is very intimate.

One does non take to go back very far in history to detect when an item currently every bit valuable as petroleum was of little or no significance. It is just recently that the various radioactive elements accept come to exist regarded as valuable. In many developing economies there are, no dubiety, deposits of many minerals that are non being used because of technological deficiencies.

(ii) Upper-case letter Formation :

Labour is combined with capital to produce goods and services. Workers demand machines, tools and factories to piece of work. In fact the use of capital letter makes workers more productive. Setting up of more factories equipped with machines and tools which heighten the productive capacity of the economic system.

Therefore, in the stance of many economists, uppercase germination is the very core of economic development. Whatsoever the type of economic arrangement, without capital aggregating the procedure of economic growth cannot be accelerated.

Levels of productivity in the United states of America are very high mainly because American people piece of work with more and better type of majuscule appurtenances congenital up over the final several years. Low productivity and poverty of developing countries is largely due to the scarcity or shortage of real physical capital in these countries.

Economic growth cannot exist speeded up without accumulating various types of capital goods, that is, without edifice factories, machines, tools, dams, bridges, roads, railways, ports, ships, irrigation works, fertilizers, etc., much economic development is not possible.

But uppercase formation requires saving, that is, the sacrifice of some current consumption. An increment in supplies of majuscule goods can merely outcome from investment, and investment in plow is just possible if a portion of current income is saved. Thus saving is essential to economic growth.

According to Professor Arthur Lewis, "The central trouble in the theory of economic growth is to sympathise the procedure by which a community is converted from being a 5 per cent saver to a 12 per cent saver with all the changes in attitudes, in institutions and in techniques which accompany this conversion Underdeveloped economies generally salvage very little; not more than than 5 per cent of their national income.

For case, saving in India on the eve of independence was about 6 per cent of the national income. On the other hand, rich countries relieve from 15 to xxx per cent of their national income. In order to bring about economic growth, charge per unit of savings must be stepped up to over 15 per cent of national income.

But in developing countries, the rate of saving is low considering income of the people is low and that they are living at the level of subsistence. Thus, the lower the per capita income, the more difficult it is to forgo current consumption. It is difficult for people living at or near subsistence level to curtail current consumption. This in large part explains the low level of saving in the poor, underdeveloped countries.

It may be noted that gross saving rate in India has now risen to 24 per cent of national income in 2001-02. Notwithstanding, for achieving 8 per cent rate of growth in GNP in the 10th plan period, it is estimated that 32 per cent charge per unit of saving is needed if upper-case letter-output ratio remains constant at 4 which was actually obtained in the 9th programme menses.

It must exist emphasized, however, that savings in itself do not contribute to economical growth. It is but when savings are invested and used productively that they contribute to economic growth. If savings are hoarded in the class of golden or precious jewels, or if they are used for buying land, they do not result in an increase in supplies of capital appurtenances and thus brand no contribution to economic growth.

Studies conducted to examine the relationship between investment and growth in terms of increase in Gross domestic product has plant that there exists a strong correlation between the ii though it is not perfect. Countries that allocate a larger fraction of their Gdp to investment such as Japan and Singapore achieved high growth rates, and countries that allocate a small share of GDP to investment such every bit People's republic of bangladesh and Nepal accept low growth rates.

Strange Upper-case letter: Foreign Help and Foreign Investment :

Every bit domestic savings are not sufficient to make possible the necessary or desired accumulation of capital goods, borrowing from abroad may play an of import role. Professor A.J. Brownish rightly says that "Evolution demands that people somewhere should refrain from spending part of their incomes, thus allowing office of the earth's productive resources to be used for accumulation of upper-case letter goods. The people who tin can best afford to do this are generally those who live in countries of high average income. On the other hand, the countries where development is likely to alleviate suffering and promote welfare to the greatest extent are those where average incomes are depression. There is a strong full general case for the rich countries lending to the poor ones."

Near every adult state obtained the foreign aid to supplement its own pocket-size saving during the early stages of its evolution. England borrowed from Holland in the seventeenth and eighteenth centuries, and in turn came to lend to nigh every other land in the world in the nineteenth and twentieth century's.

The The states, now the richest country in the world, borrowed heavily in the nineteenth century, and has now emerged every bit the major lender country of the twentieth century which is assisting the poor countries in their attempts to bring most economic growth.

Information technology should be noted that foreign capital letter does not menses into the developing countries in the form of help lonely (that is, loans at concessional rates of interest) but also through straight investment by foreign companies. Foreign direct investment (FDI) is an important way for a land to accelerate its economic growth.

Though the foreign companies send back profits earned, their investments in factories increment the rate of majuscule accumulation in the developing countries leading to a higher rate of economic growth and higher productivity of labour. Besides, foreign direct investment enables the developing countries to learn the new advanced technologies developed and used in the rich developed countries.

The importance of strange capital is reinforced by the need of a developing country for foreign exchange to purchase imports. A developing state has to import huge quantities of capital goods, technical know-how and essential raw-materials which are required for industrial growth and edifice up of infrastructure such every bit power projects, roads, irrigation facilities, ports and telecommunication.

For all these, foreign substitution is needed which can be obtained if foreign rich countries lend it to developing economies or if foreign companies make direct investment in the developing countries. If foreign assistance is not forthcoming in adequate quantity, then the developing countries will experience serious difficulties of balance of payments. In the absence of sufficient borrowing from abroad, or straight foreign investment, rapid economic development of the developing countries will plow their rest of payments seriously adverse.

Furthermore, developing countries endure not only from a shortage of savings but also from a lack of technical know-how, managerial power, etc. Foreign uppercase when it comes in the form of private investment in developing countries by foreign companies, especially the multinational corporations (MNCs) bring with it these complementary factors which are very essential for development.

Due to bad experience of the colonial rule in the past, the developing countries were generally confronting the foreign capital, peculiarly against individual foreign investment. However the fears of strange investment and aid are at present no longer there.

Further, now multilateral foreign aid is available through World Bank and International Monetary Fund (IMF) which provide loans at concessional rates to the developing countries for accelerating growth. As far equally private foreign investment is concerned, the developing countries (including Mainland china and India) are competing with each other to concenter private strange investors.

In India, the Government has prepare the target of achieving almanac inflow of $10 billion of foreign direct investment. It has at present been realised that foreign investment will not only supplement domestic saving and thereby raise the rate of investment, bring better technology and managerial know-how but will also ease the problem of strange exchange.

Through raising the rate of investment and providing foreign exchange resources, it will not simply increase output but volition as well generate employment opportunities. Besides, like the domestic investment, foreign investment also produces a multiplier effect on output, income and employment in the developing countries.

In the final fifteen years, People's republic of china'southward very high rate of economic growth which is generally described as "Chinese growth miracle" is due to college inflow of strange direct investment (FDI) equally compared to India. Foreign direct investment flows to People's republic of china grew from $iii.5 billion from 1990 to $53 billion in 2002.

On the other hand, FDI flow to India was a low $0.iv billion in 1990 and rose to $v.5 billion in 2002. Further, FDI has contributed significantly to the rapid growth of China'due south manufacturing exports. In Republic of india by contrast FDI has been much less important in driving India's consign growth, except in information technology.

For higher foreign direct investment flows to Prc World Investment Report 2003 mentions among other things that China has more business-oriented and FDI-friendly attitudes, its FDI procedures are easier and decisions are taken quickly.

Besides, China has more flexible labour laws, a better labour climate and better entry and exit procedures for business. It is therefore not unexpected that China has emerged at the top in alluring FDI flows. Against this, at present (i.due east. in 2002) India is 15th in the Globe's FDI destination.

Man Capital letter: Instruction and Health :

Till recently economists have been considering physical capital every bit the most important gene determining economic growth and have been recommending that charge per unit of concrete majuscule formation in developing countries must exist increased to accelerate the process of economic growth and raise the living standards of the people.

Only in the terminal iii decades of economic research has revealed the importance of teaching as a crucial factor in economic development, Education refers to the evolution of human skills and cognition of the labour forcefulness.

Information technology is not merely the quantitative expansion of educational opportunities but also the qualitative improvement of the education which is imparted to the labour strength that holds the key to economic evolution. Because of its meaning contribution to economic development, instruction has been chosen equally human capital and expenditure on education of the people as investment in homo or human upper-case letter.

Speaking of the importance of instruction or man capital. Prof. Harbison writes: "huhuman being resources constitute the ultimate basis of production human beings are the active agents who accumulate capital, exploit natural resources, build social, economic and political organisations; and carry forward national development. Clearly, a land which is unable to develop the skills and cognition of its people and to utilise them effectively in the national economy will be unable to develop anything else." Several empirical studies fabricated in developed countries, peculiarly the U.s.A. regarding the sources of growth or, in other words, contributions made by diverse factors such as physical capital, human being-hours, (i.e., concrete labour), education etc. have shown that pedagogy or the development of human capital is a significant source of economic growth.

Professor Solow who was ane of the first economists to measure out the contribution of man majuscule to economic growth estimated that for The states between 1909 and 1949, 57.5 per cent of growth in output per homo hour could be attributed to the residual factor which represents the consequence of technological change and of the improvement in the quality of labour mainly equally a consequence of education.

Denision, another American economist fabricated further refinement in estimating the contribution to economic growth of various factors. Denision tried to carve up and measure the contributions of various elements of 'residual factor'.

Denson's estimates for various sources of US growth during 1929-82 are given in Tabular array-ane As volition exist seen from the Tabular array-1 Gross Domestic Product in U.s.a. grew at the charge per unit of 2.ix per cent per annum over this flow. The factors determining growth in this period have been divided into two groups.

Information technology will be seen from the table, the growth in the quantity of labour accounted for 32 per cent of growth in GDP of the U.s.a. over this period. The other group consists of various variables determining growth in labour productivity has been divided into 5 factors. It is noteworthy that education per worker contributed xiv per cent to growth in output during this menstruum technological change contributed 28 per cent to the growth in output.

Thus, growth in education per worker and technological change together deemed for 42 per cent of growth in the output in the United states of america over this period whereas capital formation contributed 19 per cent to the growth rate. This shows the neat importance of education and technological modify every bit determinants of economic growth.

Some other arroyo to mensurate the contribution of instruction is based upon the analysis of the relationship between expenditure on educational activity and income. Using this approach Schultz studied the relationship between expenditure on education and individual income and also the relationship between expenditure on education and physical capital letter formation for the United States during the flow 1900 to 1956.

He found that when measured in constant dollars, "the resource allocated to pedagogy rose about three and a half times (a) relative to consumer income in dollars, (b) relative to the gross formation of physical capital in dollars" This implies that the "income elasticity" of the demand for education was about iii.v over the period or, in other words, education considered as an investment could be regarded as 3.5 times more than attractive than investment in physical capital. Information technology may, withal, be noted that these estimates of Schultz only indirectly reverberate the contribution of educational activity to economic growth.

In our in a higher place analysis nosotros have explained that education is regarded as investment and like investment in concrete capital, it raises productivity of labour and thus contributes to growth of national income. Some economists accept argued that pedagogy is of crucial importance not only because education raises the productivity and therefore earnings of individual workers, only information technology creates positive externalities, that is, beneficial external effects.

A positive externality occurs when the action of a person provides benefits to others. For example, an educated person might generate new ideas which may lead to the improvement in methods of producing goods. When these ideas become a role of society'southward pool of knowledge (i.e. stock of human upper-case letter), everyone can use them and derive benefits from them.

These ideas are therefore external benefits of education. One problem facing the developing countries, especially India is of encephalon bleed, that is, migration of a large number of highly educated persons (such as those trained past IIT, IIM and medical colleges) to the developed countries such as U.s. to make higher earnings at that place. If education has positive external furnishings, then this brain drain will deprive the Indian economy of the beneficial effects which these educated people would have created here.

(iii) Technological Progress and Economic Growth:

Another important cistron in economic growth is progress in technology, Use of avant-garde techniques in production or progress in engineering brings about a significant increase in per capita output. Technological advance refers to the discovery of new and better ways of doing things or an improvement in the sometime ways.

Sometimes technological advances effect in an increase in available supplies of natural resources. But more generally technological advance results in increasing the productivity or effectiveness with which natural resources, capital and labour are used and worked to produce goods. Equally a result of technological advance it becomes possible to produce more output with same resources or the same amount of product with less resource.

But the question arises as to how the technological progress takes place. The technological progress takes place through inventions and innovations. The discussion invention is used for the new scientific discoveries, whereas the innovations are said to have place only when the new scientific discoveries are used for actual production processes or commercial purposes. Some inventions may not be economically profitable to be used for actual production.

It is quite well known that improvements in technology greatly increase the effectiveness with which natural resource are used. In United states, for case, increased used of mechanized power-driven subcontract equipment on state has greatly raised the agronomical productivity of state per hectare.

It may also be noted that some technological improvements take resulted in the increased effectiveness with which capital goods are used. But, as stated to a higher place, technological change more generally results in higher productivity of resources.

Technological change raises the productivity of workers through the provision of improve machines, meliorate methods and superior skills. By bringing about increment in productivity of resources the progress in applied science makes it possible to produce more output with the same resources or the same amount of output with less resources.

Technical progress manifests itself in the modify in product function. And so a simple measure of the technical progress would exist the comparison of the position of production function at two points of time. The technological change may operate upon the production function through improvements of various sorts such as superior equipment, an improved material, and superior organisational efficiency.

Likewise, the technological progress may express itself in making available new products. It is now widely accustomed that technological alter raises productivity and that a continuous technological change volition enable the economy to escape from existence driven to the stationary state or economic stagnation.

Classical economists similar Ricardo and J.S. Factory expressed fearfulness that the increase in the stock of capital letter will sooner or later on, because of the operation of diminishing returns, land the economy into stationary state beyond which economic growth will come up to an end.

Classical economists remained occupied with the idea of a stationary land because they did not take into account technological progress that could postpone the occurrence of a stationary state and ensure continued economic growth. Indeed, if technological progress continuously takes identify, demon of stationary state can be put off indefinitely.

It may exist noted that Adam Smith viewed technological progress every bit a rise in productivity of workers equally a event of increase in segmentation of labour and specialisation. The rise in productivity leads to the growth in national income. But it was J.A. Schumpeter who laid cracking stress on the part of technological innovations in bringing about economic growth. He laid stress on the introduction of technical innovations in bringing near economical progress.

It is the entrepreneur who carries out the innovations and organises the production construction more efficiently. As, co-ordinate to Schumpeter, innovations occur in spurts rather than in a smooth period, economic progress is not a polish and an uninterrupted process. The footstep of economic progress is punctuated past the pace of innovations. Prof. Rostow proposed five stages in the development of an economy.

These stages are:

(i) Traditional social club;

(ii) Preconditions for takeoff;

(iii) Have-off into self-sustaining growth;

(4) Drive to maturity and

(four) Stage of high mass consumption.

It may be noted that the economical transformation of the society from one stage to some other involves, along with other things, a modify in the level and character of engineering. In the nowadays historic period of greater specialisation it is the technology factor that underlies all major aspects of the modern productive apparatus such as decision making, product programming, skill requirements and market strategy.

Productivity of worker depends upon the quantity and quality of capital tools with which the labourers piece of work. For higher productivity the instruments of production have to be technologically more efficient and superior. The technological options open to an economy determine the input-mix of production. A commodity tin exist produced past various technologies.

The quantity and quality of capital, skills and other factors required for product is direct dependent on the efficiency of the technique of product being used. Also, the managerial and organisational expertise has to exist in melody with the technological requirements of product. Viewed thus, technology in the present stage of economic evolution is an indispensable factor of production.

This is the historic period of engineering. The developing countries are obsessed by the desire to make rapid progress in engineering science so every bit to take hold of upwardly with the nowadays-day developed countries. Strenuous efforts are being fabricated to utilise improved engineering science in agriculture, industries, wellness, sanitation, didactics and, in fact, in all walks of human life. Indeed, the newly emerging nations have come to regard technology as a bastion of national autonomy and as a status symbol in the international community.

The process of technological progress is inseparably linked with the process of capital formation. In fact, both go hand in hand. Technological progress is near impossible without uppercase formation. It is considering the introduction of superior or more efficient techniques crave building up of new majuscule equipment which incorporates new technology.

In other words, new and superior technology can contribute to national product and its growth if it is first embodied in the new capital equipment. The new capital investment has, therefore, been called the vehicle for the steady introduction of new applied science into the economy.

The new inventions and innovations atomic number 82 to new and more efficient techniques of production and new and better products. As is well known, it is the inventions and innovations in cotton fabric industry that led to the industrial revolution in England. In the olden times inventions were the work of some individuals and innovations were introduced into the production process by the private entrepreneurs.

Keeping in view the importance of technological progress in the economical growth of a land, the governments of various countries are spending a lot of money on "research and development" (R & D), which is carried on in various laboratories and institutes to promote technological progress.

Developing countries are using the technology imported from the developed countries because they take not nevertheless made sufficient progress in engineering science, nor have they developed to acceptable extent capital goods industries which produce capital letter goods, embodying advanced technology.

But faux and employ of the engineering science of the advanced countries by these under-developed countries has produced ane unfavourable result. It is that the technology of the avant-garde countries is not in accordance with the factor endowments of these developing countries, since they have abundance of capital letter while the developing countries have surplus labour.

As a outcome of the utilise of the capital-intensive engineering science, enough employment opportunities have not been created by the large-scale industries using imported technology. As a result, unemployment in developing countries similar India has been increasing despite the progress in industrialisation of the economy.

In view of this not so happy experience in regard to the cosmos of employment opportunities by industrial growth, an eminent English economist, Prof. Schumacher has recommended the employ of intermediate technology or what is also known as advisable engineering science past the developing countries like India.

Past Intermediate or appropriate engineering science is meant the technology which is labour-intensive and yet highly productive so that with its use plenty employment opportunities are created along with more than production. But in order to find out this appropriate engineering for several industries, a skillful deal of inquiry and development (R & D) activity is required to be carried out.

(iv) The Growth of Population :

The growth of population is another factor which determines the rate of economic growth. The growing population increases the level of output by increasing the number of working population or labour force provided all are absorbed in productive employment.

We saw above that co-ordinate to estimates of Denison, increase in the quantity of labour contributed to the extent of 32 per cent to economical growth of output in the United states of america during 1929-1982. Moreover, the increase in population leads to the increase in demand for goods.

Thus, growing population means growing market for goods which facilitates the process of growth. When market for goods is enlarged, they can be produced on a large scale and thus economies of large-scale production tin can be reaped. The economic history of U.S.A. and European countries shows that population growth contributed greatly to the increase in their national output.

But what has been true of United states of americaA. and European countries may not be truthful in example of the present-day developing countries. Whether or not the growth of population contributes to economic growth depends on the existing size of population; the available supplies of natural and capital resources, and the prevailing technology.

In the U.s.a., where supplies of natural and majuscule resources are comparatively abundant, the growth in population raises national output past increasing the quantity of labour. In India where supplies of other economic resource peculiarly capital equipment, are relatively scarce, increment in population hinders economic growth instead of promoting it.

Labour is combined with capital to produce goods and services. Therefore, increase in the quantity of labour force volition contribute to economic growth when the cooperating factor capital is besides increasing. In the modern times workers demand machines, tools and factories to work. Since a developing country such as India has a lot of surplus labour just a small stock of capital, the workers cannot exist productive if they are employed in some activities.

We thus see that a chop-chop growing labour force by itself is no guarantee of economical growth. Increment in national output, that is, economic growth is possible only when the supplies of capital and other resources are increasing adequately along with the growth of labour force. If, on the other hand, when the supplies of capital and the other resources are meagre, the increase in the labour force (or population) will merely add together to unemployment and volition not bring well-nigh increase in national output.

Every bit stated above, economic growth requires increasing supplies of capital goods. Increasing supplies of capital goods go possible only with higher rate of investment. And a college rate of investment, in turn, is possible if rate of saving is high.

Now, increment in population past adding to number of mouths to be fed tends to enhance consumption and, therefore, lowers both saving and investment. Thus rapid growth of population past causing lower charge per unit of saving and investment tends to concur down the rate of economic growth in developing countries. Thus, under conditions like those in Republic of india population growth actually impedes economic development rather than facilitates it.

It is worth noting here that changes in total GDP which are used to mensurate charge per unit of economic growth are not a skilful measure of economic well-existence. For the purpose of evaluating changes in economic well being or living standards of the people of a country Gross domestic product per capita is more than important for it tells united states the corporeality of appurtenances and services that is bachelor for an individual in the economy.

Just how does growth in population or labour force affect GDP per capita? The reason is that chop-chop increasing labour forces the economic system to spread more thinly the other cooperating factors, especially uppercase and state. Equally a effect, capital or country per work declines causing pass up in productivity of GDP per worker.

Farther, rapid population growth nullifies out efforts to raise the living standards of our people. In other words, a high rate of increase in population swallows up a large role of the increase in national income so that per capita income or living standard of the people does not rise much.

This is precisely what has happened during the planning era in India. This while the amass national income of India went up past 17.5 per cent in the beginning plan period and 20 per cent in the 2nd plan menstruation, per capita income rose by only eight per cent and 9 per cent respectively.

Over the menstruation of the third plan, every bit confronting an increase of 11.5 per cent in national income, per capita income improved by only 0.five per cent. The relatively ho-hum rate of rise in per capita income has been due to rapid population growth. The annual charge per unit of population growth which was no more than i.86 per cent in the Beginning Plan menses went upwardly to 2.fifteen per cent in the 2nd plan period and further to 2.25 per cent in the tertiary and fourth plans.

Harrod-Domar Growth Equation: Rate of Investment and Majuscule-Output Ratio equally Determinants of Growth :

We accept analysed higher up the diverse factors such every bit availability of natural resources, rate of saving and capital formation, foreign uppercase, technological progress, increase in population which determine economical growth in a country.

These determinants of economic growth affect (1) the rate of investment and (ii) captia-output ratio. Therefore, the rate of economic growth, that is, increase in GNP depends upon the charge per unit of investment and capital-output ratio. This fact is brought out by the growth models of Harrod and Domar.

Co-ordinate to Harrod-Domar growth models rate of economical growth is given by the following formula:

m= I/v

Where grand stands for rate of growth (i.e., rate of increment in GNP)

I stands for rate of investment, and

v for majuscule-output ratio

The in a higher place equation can also be expressed in the post-obit grade:

Charge per unit of Growth = Rate of Investment/Capital – output Ratio

If in an economy rate of investment is 30% of national income and capital-output ratio is equal to 4, then from the above formula, we tin can observe out the rate of economical growth.

Rate of Growth = 30/4 = 7.five

Therefore, the rate of increment in GNP of national income will be seven.5 per cent per annum.

In the Tenth 5 Yr Programme (2002-07) information technology has been planned that the rate of investment will rise to 28 per cent of national income. Likewise, through increase in efficiency capital-output ratio has been estimated to decline to iii.5.

With 28 per cent of national income as rate of investment and three.five every bit majuscule- output ratio, target rate of growth during the Tenth Plan period has therefore been stock-still at viii per cent per annum (Applying Harrod-Domar growth equation, namely, (one thousand = 1/v = 28/iii.5 = 8% ). The experience of the concluding four years shows that both these targets of average rate of investment of 28 per cent per annum during the 10th plan period and 3.5 as capital-output ratio volition be accomplished.

Equally a matter of fact, on the basis of this Harrod-Domar growth model, it was suggested by several economists that in order to achieve a higher rate of growth, the developing countries should get foreign aid and foreign directly Investment to supplement their domestic savings to raise the rate of investment to the desired level.

In follows from to a higher place that in addition to charge per unit of investment upper-case letter-output ratio is an of import factor that determines rate of economic growth in the state. Give the rate of investment, the lower the capital letter-output ratio the college the charge per unit of economic growth. Therefore, the written report of majuscule-output ratio at some length is called for.