Have you ever wondered why US is growing so faster and India is not?? or What is the secret of China's sudden growth?? Well these questions are turning my mind inside out and i have started writing a research paper, which will provide the answer to all these questions. The general people are only concerned about the consumption and their own standard living. In fact these are only two things that one actually should be bothered about actually. Being a student not from the economics background perhaps even i would not have paid heed to such things. It is our very own policymakers who actually takes care of these changes in the economy and ensures that such steps or policies are framed that increases the overall consumption and well being of the people in the economy. But still have you ever thought, if the economy's growth become stagnant or rather falls, what will be the consequence? No right. Well until their is food to eat, house to live and money to buy it all, no one bothers about things. Take an example of US, very few people out there or probably in the world knew what "recession" actually is. It was only until recession did hit, everyone went out all gaga about what was happening in the world economy and started noticing the price changes, unemployment and the rest of the factors that might affect their own living. Well anyhow i am not asking you to sit and study economics and figure out the reasons behind economic growth increases or decreases. Leave it all to the economists and the other people who are trying to work on economic progress and also on ways to maximize the consumption. But it is always better to know what is going around so that your future is secure as in you are all ready to fight the mishaps that might hit the economy.
The world economies are amazing and understanding them deep, is all the more amazing an experience. I was sitting and reading this growth model put forward by Robert Solow, called "Solow Growth Model". ( well to give you more insight into what i am all talking about i have attached a link) This model explains the reason partly as to why some of the economies grows faster or rather are richer than the others. There are many factors that affects and also decides the economy's growth perspectives. To name, they are population, capital accumulation and technological progress. Let me take them one by one.
Firstly, savings play a very important role in the growth of an economy. The higher the savings rate, more will there be investment and more output. In short, the GDP of the economy will rise. But yes 100% savings is also not desirable. Imagine all your income you save and consume nothing, what will happen to the goods there in the market? who will buy them all? so, a desirable rate should be determined and Solow growth model tells us the way to figure out this desirable rate. Well well one point that few of you might be wondering in here that how come then US economy has such a good economic growth? savings rate there in US is very low but there are other factors that are contributing and compensating for this, majorly technological progress and low population growth compared to the rest.
Secondly, Population growth, one of the most important elements that the policymakers are generally concerned about. Population "a big thing" but why? Simple logic, more the people, more will there be need of living space, more will be the food requirements, more job seekers, less output there in the market to consume, etc. In India, the major problem is "Population and lack of technological advancement" and this one point where US scores. Think yourself, if i own a factory suppose and have installed about 15 machineries there. Firstly i hire 3 workers, capital per worker here is 5. Now as i increase, the capital per worker will decrease but consumption will increase as the units that were not used before were put into use now. But what if i employ say more than 15 people, those extra people will be a burden, only an expense and nothing more than that. So, it is same here with the economy the unproductive population is nothing but a burden to the economy, reducing the growth.
Thirdly, Technological Progress is again a very crucial thing. An economy that is technologically sound like US can mark a good growth rate.But yes again technology alone is not enough. It is just a necessary condition and not a sufficient condition.
Hence what until now that i can conclude is that one of the major factors behind the lag of the Indian economy is population. The day India will overcome this issue along with good policy implementation, it will rise even higher than US economy in terms of growth.
The world economies are amazing and understanding them deep, is all the more amazing an experience. I was sitting and reading this growth model put forward by Robert Solow, called "Solow Growth Model". ( well to give you more insight into what i am all talking about i have attached a link) This model explains the reason partly as to why some of the economies grows faster or rather are richer than the others. There are many factors that affects and also decides the economy's growth perspectives. To name, they are population, capital accumulation and technological progress. Let me take them one by one.
Firstly, savings play a very important role in the growth of an economy. The higher the savings rate, more will there be investment and more output. In short, the GDP of the economy will rise. But yes 100% savings is also not desirable. Imagine all your income you save and consume nothing, what will happen to the goods there in the market? who will buy them all? so, a desirable rate should be determined and Solow growth model tells us the way to figure out this desirable rate. Well well one point that few of you might be wondering in here that how come then US economy has such a good economic growth? savings rate there in US is very low but there are other factors that are contributing and compensating for this, majorly technological progress and low population growth compared to the rest.
Secondly, Population growth, one of the most important elements that the policymakers are generally concerned about. Population "a big thing" but why? Simple logic, more the people, more will there be need of living space, more will be the food requirements, more job seekers, less output there in the market to consume, etc. In India, the major problem is "Population and lack of technological advancement" and this one point where US scores. Think yourself, if i own a factory suppose and have installed about 15 machineries there. Firstly i hire 3 workers, capital per worker here is 5. Now as i increase, the capital per worker will decrease but consumption will increase as the units that were not used before were put into use now. But what if i employ say more than 15 people, those extra people will be a burden, only an expense and nothing more than that. So, it is same here with the economy the unproductive population is nothing but a burden to the economy, reducing the growth.
Thirdly, Technological Progress is again a very crucial thing. An economy that is technologically sound like US can mark a good growth rate.But yes again technology alone is not enough. It is just a necessary condition and not a sufficient condition.
Hence what until now that i can conclude is that one of the major factors behind the lag of the Indian economy is population. The day India will overcome this issue along with good policy implementation, it will rise even higher than US economy in terms of growth.
