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Unit 1: Economics of Growth and Development: Meaning, Measurement, Difference and Comparisions

programmes like land reforms, expansion of banks, improved agricultural techniques and Notes
other farm implements, availability of better marketing facilities, means of power and
irrigation, and so on. In LDCs the agriculture and industry become complementary to eachother.
The progressively increasing productivity in agriculture enhances the per capita real income
of the people, engaged in agriculture sector. This, in turn, expands rural demand for consumer
goods and agricultural inputs which stimulates the expansion of industrial sector, and further,
it also develops agriculture sector by providing improved farm techniques along with machines,
fertilisers and other inputs. The scope for increasing agricultural productivity and incomes, in
other words, is heavily dependent upon the structural transformation of the economy as it
affects the growth of commercial demand for goods produced, the growth of alternative
employment opportunities, and the increased quantity of purchased inputs available to the
agricultural sector”.

1.9.2 Non-Economic Factors
Both of the economic or noneconomic factors do play an important role in the process of economic
growth. In this regard, socio-economic, cultural, psychological and political factors are also equally
significant as are economic factors in economic development of the LDCs Cairncross rightly observes:
“Development is not just a matter of having plenty of money, nor is it purely an economic
phenomenon. It embraces all aspects of social behaviour; the establishment of law and order;
scrupulousness in business dealings, including dealings with the revenue authorities; relationships
between the family, literacy, familiarity with mechanical gadgets and so on”. We discuss here some
of the essential noneconomic factors which determine the economic growth of an economy.

1. Political Factors: Political stability and strong administration are essential and helpful in
modern economic growth. It is because of political stability and strong administration that the
countries like the U.K. the U.S.A., Germany, France and Japan have reached the level of highest
economic growth in the world. But in most of the poor countries there is political instability
and weak administration which have largely influenced their economic development
programmes. It is, therefore, essential for their faster economic development to have a strong,
efficient and incorrupt administration. In conclusion, we can say that a clean, just and strong
administration can put an economy on the way to rapid economic development. Lewis rightly
comments that “no country has made progress without positive stimulus from intelligent
governments”.
2. Social and Psychological Factors: Modern economic growth process has been largely influenced
by social and psychological factors. Social factors include social attitudes, social values and
social institutions which change with the expansion of education and transformation of culture
from one society to the other. The Industrial Revolution of England and other Western European
countries in the 18th century was largely influenced by the spirit of adventure and the expansion
of education which led to new discoveries and inventions and consequently to the rise of the
new entrepreneurs. Social attitudes, values and institutions changed. Joint family system was
replaced by the new single family system which further led to the rapid economic development
in these countries.
But the society in LDCs has been badly enveloped and guided by traditional customs, outdated
ideology, values, and obsolete attitudes which have not been conducive to their economic
development. Thus, there is need to change or modify these social and psychological factors
for the rapid economic development in these countries. But it is not an easy task, and moreover,
any rapid change may bring discontentment and resistance in the society, with the result that
it may adversely affect the economic growth in the economies.
Only the selective social and psychological changes can lead to economic growth in LDCs.
According to the UN Report on Economic Development of Underdeveloped Countries, it is
hence impossible to speed up economic growth in these economies without painful adjustments.

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