Factors necessary for economic growth are:
- Availability of natural resources in term of quantity and quality e.g. land water, natural forest, national parks, etc. produce goods and services.
- Capital accumulation through savings and channeling these savings into investment in agriculture, industry and infrastructure.
- Improvement in quality and quantity of labour through formal and informal education. If the country has a big and skilled labour force, production increases hence economic growth. On the other hand, a small-unskilled labour force discourages production hence low levels of economic growth.
- Technological advancement to produce volume and quality of goods and service. Use of modem technology increases production at reduced average costs hence economic growth. On the other hand, use of poor production techniques reduces output hence low level of economic growth.
- Increase in the number and quality of entrepreneurs. Presence of individuals who have the ability to organize and mobilize other factors of production leads to an increase in production hence economic growth and absence of such individuals discourages production hence low levels of economic growth.
- Availability of market including local and foreign market. The large market encourages investments which lead to the production of more goods and services hence economic growth. But a narrow market discourages investment and production hence low levels of economic growth.
- Ideal population growth to provide labour and market
- Political stability. Political stability encourages investment and lead to economic growth
- Socio-cultural attitude should be changed so as to stimulate economic growth
- Appropriate planning and effective implementation of economic programs.
- Level of investment. High level of investment in an economy increases the production of goods and services.
- The level of monetization of the economy. The higher the level of monetization of the economy, the higher the level of economic growth, But a large subsistence sector discourages production and exchange hence low levels of economic growth.
- The degree of specialization and division of labour in production. The high degree of specialization in the economy leads to economies of large scale production hence economic growth and the low degree of specialization discourages large scale production hence low level of economic growth.
- The level of social and economic infrastructure. Presence of adequate social and economic infrastructure in form of roads, power generation plants, banks etc. stimulates production activities hence raising the rate of economic growth. On the other hand, low levels of infrastructural development hinder the mobilization of factors of production hence retarding economic growth.
- Degree of economic stability. If the country is economically stable in form of stable prices of goods and services, stable exchange rates etc. investments are encouraged hence increase in the level of economic growth. But if there is high levels of inflation, investments are discouraged hence low levels of national income.
- Nature of government policy. Favourable government policies in form of providing subsidies to the producers , giving tax holidays to the investors etc. promote investments hence economic growth while poor government policies like high tax rates discourage investors hence limiting the rate of economic growth.
CATEGORIES Economics
TAGS Dr. Bbosa Science
