Similarly, Britain has developed its industrial sector by importing some minerals and raw materials from abroad. However, an economy having deficiency in natural resources is forced to depend on foreign country for the supply of minerals and other raw materials in order to run its industry. Thus in conclusion it can be observed that availability of natural resources and its proper utilization is still working as an important determinant of economic growth.
Capital formation and capital accumulation are playing an important role in the process of economic development of the country. Here capital means the stock of physical reproducible factors required for production. The increase in the volume of capital formation leads to capital accumulation. Thus it is quite important to raise the rate of capital formation so as to accumulate a large stock of machines, tools and equipment by the community for gearing up production. Moreover, capital formation requires the suitable skill formation so as to utilise physical apparatus or equipment for raising the productivity level.
In an economy, capital accumulation can help to attain faster economic development in the following manner: Various developed countries like Japan have been able to attain higher rate of capital formation to trigger rapid economic growth. Normally, the rate of capital formation in underdeveloped countries is very poor. Therefore, they must take proper steps, viz. In order to attain a rapid economic growth, the rate of domestic savings and investment must be raised to 20 per cent.
Naturally, in the initial period, it is not possible to step up the rate of capital formation at the required rate by domestic savings alone. Initially, to step up the rate of investment in the economy, inflow of foreign capital to some extent is important. But with the gradual growth of domestic savings in the subsequent years of development, the dependence on foreign capital must gradually be diminished.
Being a technologically backward country, India has decided to permit foreign direct investment in order to imbibe advanced technology for attaining international competitiveness under the present world trade and industrial scenario. Capital-output ratio is also considered as an important determinant of economic development in a country. By capital-output ratio we mean number of units of capital required to produce per unit of output. It also refers to productivity of capital of different sectors at a definite point of time.
But the capital output ratio in a country is also determined by stage of economic development reached and the judicial mix of investment pattern. Moreover, capital-output ratio along with national savings ratio can determine the rate of growth of national income.
This is a simplified version of Harrod-Domar Model. This equation shows that rate of growth of GNP is directly related to savings ratio and inversely related to capital-outlet ratio. Thus to achieve a higher rate of growth of national income, the country will have to take the following two steps: Favourable investment pattern is an important determinant of economic development in a country.
This requires proper selection of industries as per investment priorities and choice of production techniques so as to realise a low capital-output ratio and also for achieving maximum productivity. Thus in order to attain economic development at a suitable rate, the Government of the country should make a choice of suitable investment criteria for the betterment of the economy.
The suitable investment criteria should maximise the social marginal productivity and also make a balance between labour intensive and capital intensive techniques.
Another determinant of economic development is the occupational structure of the working population of the country. Too much dependence on agricultural sector is not an encouraging situation for economic development. Increasing pressure of working population on agriculture and other primary occupations must be shifted gradually to the secondary and tertiary or services sector through gradual development of these sectors.
In India, as per census, about As per World Development Report, , whereas about 45 to 66 per cent of the work force of developed countries was employed in the tertiary sector but India could absorb only 18 per cent of the total work force in this sector. The rate of economic development and the level of per capita income increase as more and more work force shift from primary sector to secondary and tertiary sector.
Thus to attain a high rate of economic development, inter-sectoral transfer of work force is very much necessary. The extent and pace of inter-sectoral transfer of work force depend very much on the rate of increase in productivity in the primary sector in relation to other sectors.
Extent of the market is also considered as an important determinant of economic development. Expansion of the scale of production and its diversification depend very much on the size of the market prevailing in the country. Moreover, market created in the foreign country is also working as a useful stimulant for the expansion of both primary, secondary and tertiary sector of the country leading to its economic development.
Japan and England are among those countries which have successfully extended market for its product to different foreign countries. Moreover, removal of market imperfections is also an important determinant of economic development of underdeveloped countries.
Accordingly, market in those countries must be free from all sorts of imperfections retarding the economic development of the country. Removal of market imperfections will make provision for flow of resources from less productive to more productive occupations which is very much important for the development of an underdeveloped economy.
Technological advancement is considered as an important determinant of economic growth. By technological advancement we mean improved technical know-how and its broad- based applications. With the advancement of technology, capital goods became more productive.
The following conditions must be satisfied for attaining technological advancement in a country: As underdeveloped countries have failed to fulfill these conditions thus their development process is neither self-sustaining nor cumulative. Thus in order to attain a higher rate of development, the underdeveloped countries should adapt only that type of technology which can suit their requirements. Developing countries like Mexico, Brazil and India have been applying technologies developed by advanced countries as per their own conditions and requirements.
Thus to attain a high level of economic development, the under-developed countries should try to achieve technological progress at a quicker pace. In recent years, economic planning has been playing an important role in accelerating the pace of economic development in different countries. Economic development is considered as an important strategy for building various social and economic overhead infrastructural facilities along with the development of both agricultural, industrial and services sectors in a balanced manner.
Planning is also essential for mobilisation of resources, capital formation and also to raise the volume of investment required for accelerating the pace of development. Countries like former U. The present situation in the world economy necessitates active support of external factors for sustaining a satisfactory rate of economic growth in underdeveloped economies.
Moreover, domestic resources alone cannot meet the entire requirement of resources necessary for economic development. Therefore, at certain levels, availability of foreign resources broadly determines the level of economic development in a country. The external factors which are playing important role in sustaining the economic development include: Economic factors alone are not sufficient for determining the process of economic development in a country.
In order to attain economic development proper social and political climate must be provided. The people of a country must desire progress and their social, economic, legal and political situations must be favourable to it.
Emphasising the role of non-economic factors, Prof. It is spirit itself that builds the body. Underdevelopment countries are facing various socio-political hurdles in the path of economic development.
Thus in order to attain economic growth, raising the level of investment alone is not sufficient rather it is also equally important to gradually transform outdated social, religious and political institution which put hindrances in the path of economic progress. Thus following are some of the important non-economic factors determining the pace of economic development in a country: It is the mental urge for development of the people in general that is playing an important determinant for initiating and accelerating the process of economic development.
In order to attain economic progress, people must be ready to bear both the sufferings and convenience. Experimental outlook, necessary for economic development must grow with the spread of education. Economic progress is very much associated with the spread of education. Thus education is working as an engine for economic development.
In this connection, Prof. So, education plays pioneer role for the creation of human capital and social progress which in turn determines the progress of the country.
Conservative and rigid social and institutional set up like joint family system, caste system, traditional values of life, irrational behaviour etc. Thus to bring social and institutional change as per changing environment and to realise the modern values of life are very much important for accelerating the pace of economic development in a country.
Maintenance of law and order in a proper manner also helps the country to attain economic development at a quicker pace. Stability, peace, protection from external aggression and legal protection generally raises morality, initiative and entrepreneurship.
Formulation of proper monetary and fiscal policy by an efficient government can provide necessary climate for increased investment and also can stimulate capital formation in the country. Thus in order to accelerate the pace of economic development the government must make necessary arrangement for the maintenance of law and order, defence, justice, security in enjoyment in property, testamentary rights, assurance to continue business covenants and contracts, provision for standard weights and measures, currency and formulation of appropriate monetary and fiscal policies of the country.
But the economy of underdeveloped countries is now facing serious threat from large scale disorder, terrorism, disturbances in the international border etc. All these have led to diversion of resources and initiatives from developmental to non-developmental ends.
Moreover, under such a chaotic situation, capital formation process, business initiatives and enterprise of private firms are seriously suffered and distorted leading to a stagnation of economy in these countries.
Economic development of a country also demands existence of a strong, honest, efficient and competent administrative machinery for the successful implementation of government policies and programmes for development. The existence of a weak corrupt and inefficient administrative machinery leads the country into chaos and disorder.
The development process of an underdeveloped or developing economy is not an easy task rather it is a complicated one as these countries are not having any common characteristics.
Thus the underdeveloped or developing countries are facing several constraints or obstacles to its path n economic development. These short-term constraints are related to over concentration and stagnation in agricultural sector, unemployment and under-employment, low productivity of capital, the growing deficit in its balance of payment position etc.
Again, the long-term constraints include infrastructural bottlenecks, financial constraints etc. The following are some of the important obstacles or constraints on the path of economic development of underdeveloped countries: In the initial part of their development process, most of the underdeveloped countries were under foreign domination which had led to the huge colonial exploitation by the foreign rulers.
Foreign rulers converted these economies as primary producing countries engaged in the production of raw materials only to be supplied to the ruler country at cheaper prices and also a potent market for the sale of the manufacturing products produced by the ruler country.
However, in the long run he, too, must suffer, sharing with his brethren the common miseries of life. Apart from the miseries of common person, as a nation, too, we are most discontented.
As a nation, we are steeped in debt. Of course it is necessary for a growing country to borrow money; the international situation is such that foreign powers willingly lend us money. From, where has money to come for the repayment of all our debt? We are hoping for a greatly increased productivity of our economy. But it must be noted that it is the debt. The average person has to put his hands in his pocket to supply the money for the redemption of the mounting foreign loans.
Economic development theories relate to the causes of industrial-economic modernization, the phases of economic development, and the organizational related aspects of enterprise development; it requires sociological, economic, and cultural researches on the evolution of markets and industrial organizations within modern societies. From other perspectives, economic development of embrace improvements in a variety of indicators such as literacy rates, life expectancy, poverty rates, health, and education.
In fact, these indicators are more related to economic growth so that development goes often with growth. Other economists claim that economic growth causes or contributes to economic development, because according to this perspective, because at least some of the increasing income is spend on human sustainable development such as education and health; this is actually the most reasonable approach regarding this link that joins growth to development.
As economic development relates directly to human development, we can understand this relationship with so many different explanations. For instance, an increase in disposable incomes often leads to improvement in health and nutrition among others. Other people may define economic improvement of social outcomes related to different so called basic necessities such as clean water supply, education, social safety and so on. The main point here is that, regardless of the approach used to connect economic development to human development, the outcome is always the same: Technically, we mean by economic development the increase in per capita income or the increase in national gross product GNP ; it deals with macroeconomic causes of long term economic growth, and microeconomic issues such as the incentives of households and firms.
This involves mathematical methods like differential equations and optimization. Scientists define three building blocks of most economic development models: In addition to the different mathematical methods used to calculate economic development, the HDI human development index is another widely used process to calculate development.
This does not mean that the HDI replaces the other methods, but rather adds many other aspects for a considerable understanding of economic development. Another advantage of HDI is that it focuses on the ultimate objective of economic development and not only the means used to reach it. By far, it is the widely used approach for measuring economic development because it is more meaningful than the GNP or any other methods for there are much greater immoderations in income distribution in the distribution of life expectancy and literacy.
Politically, economic development is a rigorous struggle on the part of responsible governing body in a country. Every political agenda of political bodies includes economic and human development.
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Economic development is a fairly new idea that arose during the early twentieth century.
Economic Development Essay. Economic development is the increase in the standard of living of a population. Economic development includes economic growth among the main criteria. Economic growth is a sustained growth from a simple economy to a modern one. The study of economic development includes theories of the causes, the . Todaro, M.P. and Smith, S.C., Economic Development, Eight Edition, Pearson Addison-Wiley (), pp Cite This Essay To export a reference to this article please select a referencing stye below.
ADVERTISEMENTS: In this essay we will discuss about the Economic Development of a Country. After reading this essay you will learn about: 1. Economic Growth and Economic Development 2. Determinants of Economic Development 3. Obstacles or Constraints 4. Pre-Requisites or Need 5. Structural Changes. Contents: Essay on the Meaning of Economic Development Essay . The first important task for a society is to maintain itself. There must be food, clothing and shelter for its members. Modem men spend most of their daytime making a living. It is not sufficient that there must be a system of production in society equally important in its distributive system.