Growth Economics

Key aspects
➔ Economic growth looks at the macroeconomic performance of an economy, most
commonly by tracking a measure of total output known as gross domestic product (
GDP ).
➔ An increase in GDP means an economy is producing more goods, so it is growing.
➔ Inflation or deflation can make it difficult to measure economic growth. Because of
this, the nominal GDP is adjusted for inflation or deflation.
➔ Long run growth trends come from much deeper changes with long-lasting
consequences.
➔ Shocks like political upheavals, speculative bubbles, and other events can cause
business cycle fluctuations.
➔ Long run growth trends come from much deeper changes with long-lasting
consequences.
➔ Advancements in technology has the possibility of changing the future of production,
as we saw in the Industrial Revolution.
Terminologies
➔ Nominal gdp: The raw GDP figure, as given by the GDP calculation equation, is
called the nominal, historical, or current GDP.
➔ Real GDP: Real Gross Domestic Product (real GDP) is a macroeconomic measure of
the value of economic output adjusted for price changes (i.e., inflation or deflation).
This adjustment transforms the money-value measure, nominal GDP, into an index for
quantity of total output.
➔ GDP: Gross Domestic Product (Economics). A measure of the economic production
of a particular territory in financial capital terms over a specific time period.
➔ Deflation: a decrease in the general price level of goods and services
➔ Inflation: An increase in the general level of prices or in the cost of living.
Economic Planning
Meaning

An economic plan is an outline of schemes designed to achieve certain

predetermined economic objectives, in a particular order of priorities within a
specified period of time. This is the technique that a state follows to achieve
economic development.

The economy, which makes efforts to achieve development through economic

plans, is known as planned economy.
Aims of Economic Plan

The aims of economic planning are –

improving the economic system, making the social and moral upliftment of the people, and
strengthening the country’ from the political point of view.

At present, economic planning is adopted by almost all economies of the world in some
form or the other so as to remove vicious circle of poverty. India has accepted economic
planning for its Central and State Governments.
Features of Economic Plan
1) Determining the objectives that are to be achieved.
2) Estimating the resources that are available in the country.
3) Determining the order in which the objectives are to be achieved.
4) Designing suitable schemes for realizing of the objectives.
5) Determining the plan outlay and investment.
6) Allocation of resources between different sectors as per the priority of objectives
7) Establishing a body for the formulation, organization and appraisal of the plans
Need for Economic Plan
1) To attain steady economic development in a free market economy.
2) To remove unemployment, poverty and inequalities among people.
3) To provide infrastructural facilities such as banking, power, water, transport and
communications.
4) To allocate resources properly between present and future needs.
5) To attain balanced regional development.
Types of Economic Plans

Economic planning can be divided into four types such as-

1. Perspective Plans: Perspective plan is a long-term plan. Generally, it is formulated for a

period ranging from 15 years to 20 years.

2. Five-year Plans: Five-years plans as their name indicate are designed for a period of
five years. It is an integral part of perspective plan.
 Cont….

3. Annual Plans: Annual plan is a part of five-year plan. It is prepared year-wise. So for
each five-year plan, five annual plans will be prepared in a detailed manner.

4. Rolling Plans: Rolling plans do not have a fixed period of time. These plans have only
duration and move forward. As it moves forward the year, which was completed, is deleted
and one year is added at the end.