TUMKUR UNIVERSITY

DEPARTMENT OF STUDIES AND RESEARCH IN BUSINESS

ADMINISTRATION
SUBJECT: Sustainable development and CSR
Topic: Economic growth and progress
A. Generating economic growth
B. Challenges and opportunities of economic growth

Assignment-02
Submitted By,
VISHNU PRIYA T K (P11AZ22M015079)
SAROJA E (P11AZ22M015017)
LALITHA K (P11AZ22M015035)
VINUTHA D R (P11AZ22M01080)
SUMANA H Y (P11AZ22M015108)
2nd year 3rd semester in (Finance),MBA
Submitted To,
DR. Renuka M
Guest Lecturer
Department of MBA
MAY-2024
INTRODUCTION
Economic growth is an increase in the production of economic goods and services in one period
of time compared with a previous period. It can be measured in nominal or real (adjusted to remove
inflation) terms. Traditionally, aggregate economic growth is measured in terms of gross national
product (GNP) or gross domestic product (GDP), although alternative metrics are sometimes used

An example of this is the Invention of gasoline fuel; prior to the discovery of the energy- generating
power of gasoline, the economic value of petroleum was relatively low. The use of gasoline became
a better and more productive method of transporting goods in process and distributing final goods
more efficiently

MEANING
Economic growth is the increase of national income or national output, regarding economic goods
and products compared to one form another time. On the other hand, economic development means
long term economic growth, such as a country having an increased rate of income.

Economic growth and progress are central concepts in the study of economics, reflecting the
dynamic evolution of economies over time. Economic growth refers to the increase in the
production and consumption of goods and services within an economy over a sustained period. It
is typically measured by the growth rate of real GDP (Gross Domestic Product), which accounts
for inflation.

PHASES OF ECONOMIC GROWTH

STAGES OF ECONOMIC CYCLE
An economic cycle is the circular movement of an economy as it moves from expansion to
contraction and back again. Economic expansion is characterized by growth and contraction,
including recession, a decline in economic activity that can last several months. Four stages
characterize the economic cycle or business cycle.

Expansion
During expansion, the economy experiences relatively rapid growth, interest rates tend to be low,
and production increases. The economic indicators associated with growth, such as employment
and wages, corporate profits and output, aggregate demand, and the supply of goods and services,
tend to show sustained uptrends through the expansionary stage. The flow of money through the
economy remains healthy and the cost of money is cheap. However, the increase in the money
supply may spur inflation during the economic growth phase.

Peak
The peak of a cycle is when growth hits its maximum rate. Prices and economic indicators may
stabilize for a short period before reversing to the downside. Peak growth typically creates some
imbalances in the economy that need to be corrected. As a result, businesses may start to revaluate
their budgets and spending when they believe that the economic cycle has reached Its peak.

Contraction
A correction occurs when growth slows, employment falls, and prices stagnate. As demand
decreases, businesses may not immediately adjust production levels, leading to oversaturated
markets with surplus supply and a downward movement in prices. If the contraction continues, the
recessionary environment may spiral into a depression.

Trough
The trough of the cycle is reached when the economy hits a low point, with supply and demand
hitting bottom before recovery. The low point in the cycle represents a painful moment for the
economy, with a widespread negative impact from stagnating spending and income. The low point
provides an opportunity for individuals and businesses to reconfigure their finances in anticipation
of a recovery.
BENEFITS OF ECONOMIC GROWTH

 Higher Employment
 Improve business confidence
 Increase tax revenue
 Improved living standard
 Higher investment
 Potential environment benefits
 Improvement in welfare

Higher employment:
When demand for a product or service increases, companies increase their output to meet the
increased demand. Companies do this by investing more and hiring more workers. More workers
start the cycle over, with there being even more money spent in the economy, increasing demand
further.
For example Agriculture and allied activities provide the highest employment in the Indian
economy. In India, Agriculture employs 50%-60% of the population
Improved business confidence:
Economic growth normally has a positive impact on a company profits & business confidence.

Increase tax revenue:

Economic growth creates higher tax revenue providing with government etra money to finance
spending project.

Sources like individual income taxes, 9 percent from corporate income taxes, and another 30
percent from payroll taxes that fund social insurance programs.

Improved living standard:

Growth leads to better living standard and low poverty rates.

For example: The standard of living in India varies from state to state. In 2021, extreme poverty
was Reduced to 0.8% and India is no longer the nation with the largest population living in poverty.

Higher investment: Higher consumer demands leads to higher investment level.

Potential environment benefits: Richer countries have more resources available to invest in
cleaner technologies.

Improvement in welfare: Increase in economic growth of a country leads to its ability to

provide support for elderly, homeless and orphaned people.

HERE’S A BREAKDOWN OF KEY CONCEPTS RELATED TO

ECONOMIC GROWTH AND PROGRESS:

1.Factors of Economic Growth:

Economic growth is influenced by various factors, including increases in labor productivity,
technological advancements, capital accumulation (investment in physical and human capital),
institutional quality (such as rule of law, property rights protection, and efficient governance), and
favorable macroeconomic policies.

2.Long-Term vs. Short-Term Growth:

Economic growth can occur in the short term due to cyclical factors or one-time events, but
sustainable economic progress requires long-term, sustained growth driven by improvements in
productivity and innovation.

3 Measurement of Economic Growth:

Real GDP growth is the most common measure of economic growth, but it has limitations, such
as not accounting for income distribution, environmental degradation, or non-market activities.
Alternative measures, such as the Human Development Index (HDI) or Gross National Happiness
(GNH), attempt to capture broader aspects of progress.

4.Inclusive Growth:
Inclusive growth emphasizes the importance of ensuring that the benefits of economic growth are
shared equitably across different segments of society. Policies promoting inclusive growth aim to
reduce poverty, inequality, and social exclusion while fostering opportunities for all individuals to
participate in and benefit from economic progress.

5.Sustainable Development:
Economic progress must be sustainable, meaning it should not compromise the ability of future
generations to meet their own needs. Sustainable development balances economic. Social, and
environmental objectives, aiming for intergenerational equity and environmental stewardship.

6.Challenges to Economic Progress:

Challenges to economic progress include structural impediments such as inadequate infrastructure,
education and healthcare deficits, corruption, political instability, and environmental degradation.
Addressing these challenges often requires coordinated efforts from governments, businesses, civil
society, and international organizations.

7.Higher investment:
Higher consumer demands leads to higher investment level.

8. Potential environment benefits:

Richer countries have more resources available to invest in cleaner technologies.

9.Improvement in welfare:
Increase in economic growth of a country leads to its ability to provide support for elderly,
homeless and orphaned people.

DIFFERENCE BETWEEN ECONOMIC GROWTH AND DEVELOPMENT

BASIS ECONOMIC GROWTH
Meaning Economic growth is the
positive change in the real
output of the country in a
particular span of time.
ECONOMIC
DEVELOPMENT
Economic development
involves rise in the level of
production in an economy
along with the advancement
of technology, improvement
in living standards and so on.

Concept Narrow Broad

Scope Increase in the indicators like Improvement in life

GDP, per capita income etc. expectancy rate infant
mortality rate, literacy rate
and poverty rates
Applicable Developed Economies Developing Economics
to

How it can Upward movement in Upward movement in real

be national income national income
measured?

Which kind Quantitative changes Qualitative and quantitative

of changes changes
are
expected?

Type of Automatic manual

process

GENERATING ECONOMIC GROWTH

1)Increase Physical Capital Goods
The first is an increase in the amount of physical capital goods in the economy. Adding capital to
the economy tends to increase productivity of labour. Newer, better, and more tools mean that
workers can produce more output per time period.

For a simple example, a fisherman with a net will catch more fish per hour than a fisherman with
a pointy stick. However two things are critical to this process.

Someone in the economy must first engage in some form of saving (sacrificing their current
consumption) in order to free up the resources to create the new capital. In addition, the new capital
must be the right type, in the right place, and at the right time for workers to actually use it
productively.

2)Improve Technology
A second method of producing economic growth is technological improvement.

An example of this is the invention of gasoline fuel; prior to the discovery of the energy- generating
power of gasoline, the economic value of petroleum was relatively low. The use of gasoline became
a better and more productive method of transporting goods in process. And distributing final goods
more efficiently.

3)Grow the Labour Force

Another way to generate economic growth is to grow the labor force. All else being equal, more
workers generate more economic goods and services. During the 19th century, a portion of the
robust U.S. Economic growth was due to a high influx of cheap, productive immigrant labour. [7]
However, as with capital-driven growth, there are some key conditions to this process.
Increasing the labour force necessarily increases the amount of output that must be consumed in
order to provide for the basic subsistence of the new workers, so the new workers need to be at
least productive enough to offset this and not be net consumers. Also, just like additions to capital,
it is important for the right type of workers to flow to the right jobs in the right places in
combination with the right types of complementary capital goods in order to realize their
productive potential.

4) Increase Human Capital

The last method is to increase human capital. This means labourers become more accomplished at
their crafts, raising their productivity through skills training, trial and error, or simply more
practice. Savings, investment, and specialization are the most consistent and easily controlled
methods.
Human capital in this context can also refer to social and institutional capital. Behavioural
tendencies toward higher social trust and reciprocity, along with political or economic innovations
such as improved protections for property rights.

CHALLENGES OF ECONOMIC GROWTH

Economic challenge can be at a city, regional, or country level. Here are some of economic growth
challenges that past participants have worked on during the program.

 High rates of unemployment or underemployment

 Increasing inequality, with many not being included in the growth process
 High rates of poverty and low growth
 Volatile growth dependent on one source
 Disruption of major economic activities due to the pandemic, e.g. Tourism
 Lack of fiscal space to save jobs and address pandemic
 Macroeconomic instability and recurrent balance of payments shocks
 Low productivity due to poor human capital development
 Skills mismatch between skills you have and the jobs you want to create
 Lack of quality jobs; high levels of informality in the economy
OPPORTUNITIES OF ECONOMIC GROWTH
  The cost of living is low in India. This contributes to the availability of cheap labour for
the industry as well as an opportunity to provide a better lifestyle to people with a
significantly low investment.
 The population of India is also a boon for the country. As the number of educated people
increases with time in India, it provides a more skilled and specialised workforce pool.
 The desire of living a better urban life by leaving rural areas and moving to cities is also
helping in the growth of the Indian economy. As more and more educated youth are shifting
toward cities, the trend of employment is also shifting from agriculture to the industrial.
 Various industries like Bollywood, BPO, and L.PO also assist the Indian economy by
providing relatively cheaper services than rival foreign industries. For example, the Hindi
film industry contributes about $4.5 billion to the Indian GDP, with a film cost of $1.5
million on an average compared to Hollywood, which has an average cost of $47.7 million
per film
 Shifting to renewable energy sources like solar and hydro can significantly support the
Indian economy in times of depleting non-renewable resources.
 The development in technology will help solve most of the significant challenges in the
Indian economy.
 The government's efforts and investments in education and healthcare can be crucial in
shifting the unskilled labour force to the skilled workforce in India.

MEASURES OF ECONOMIC GROWTH

The most common measure of economic growth is the real GDP. This is the total value of
everything, both goods and services, produced in an economy, with that value adjusted to remove
the effects of inflation. There are three different methods for looking at real GDP.

1.Quarterly growth at an annual rate

This looks at the change in the GDP from quarter to quarter, which is then compounded into an
annual rate. For example, if one quarter’s change is 0.3%, then the annual rate would be
extrapolated to be 1.2%.

2. Four-quarter or year-over-year growth rate

This compares a single quarter’s GDP from two st¿ccessive years as a percentage. It is often used
by businesses to offset the effects of seasonal variations.

3. Annual average growth rate

This is the average of changes in each of the four quarters. For example, if in 2022 there were four-
quarter rates of 2%, 3%, 1.5%, and 1%, the annual average growth rate for the year would be
7.5%+41.875%.

IMPORTANTS OF ECONOMIC GROWTH

1. Economic growth
Economic growth is an increase in the capacity of an economy to produce goods and services,
compared from one period of time to another

2. Higher Tax Revenues

Higher tax revenues mean a country can spend more on improving infrastructure, health, and
education keys to the long-term prospects for a country's economy and people.

3. The public sector Investment

public investment, investment by the state in particular assets, whether through central or local
governments or through publicly owned industries or corporations

4. Private Sector Investment

Spending on capital goods by businesses and individual investors rather than by government.

5.Increased productive Capacity

Productive capacities are the productive resources, entrepreneurial capabilities and production
linkages that together determine a country’s ability to produce goods and services that will help it
grow and develop.

FACTORS OF AFFECTING A ECONOMICAL GROWTH

Investment:
Increased investment in infrastructure, technology, and human capital can spur economic growth
by boosting productivity and efficiency.

Education and Workforce Development:

A well-educated and skilled workforce can drive innovation and productivity, leading to economic
growth.

Technology and Innovation:

Advances in technology can improve productivity, create new industries, and enhance
competitiveness, all of which contribute to economic growth.

Trade and Globalization:

International trade can stimulate economic growth by providing access to new markets, resources,
and technologies.

ECONOMICAL GROWTH AND PROGRESS IN INDIA

1.Liberalization and Economic Reforms:

In the early 1990s, India implemented major economic reforms aimed at liberalizing the economy,
opening it up to foreign investment, and reducing government intervention. These reforms have
contributed to higher growth rates and increased competitiveness.

2.Information Technology and Services Sector:

India’s booming IT industry has played a crucial role in driving economic growth, attracting
foreign investment, and generating employment opportunities. The country has become a global
hub for IT services, software development, and business process outsourcing.

3. Demographic Dividend:
With a large and relatively young population, India benefits from a demographic dividend. Where
a high proportion of working-age individuals can drive economic growth through increased
productivity and consumption.

4.Infrastructure Development:
Despite challenges, India has made significant strides in infrastructure development, including
transportation, energy, and telecommunications. Investments in infrastructure are crucial for
sustaining economic growth and improving living standards.

5.Urbanization:

Rapid urbanization has led to the growth of cities and urban centers, driving economic activity and
consumption. Urbanization also presents opportunities for increased productivity and efficiency,
although it also brings challenges such as congestion and environmental degradation

CONCLUSION
Economic growth refers to an increase in aggregate production in an economy, which is generally
manifested in a rise in national income.1 Often, but not necessarily, aggregate gains in production
correlate with increased average marginal productivity. Economic growth, measured by real GDP,
helps address socio-economic issues and improve living standards. However, it must be balanced
with responsible environmental policies to prevent resource depletion.