The document discusses various economic and non-economic factors that promote economic development. It identifies key economic factors such as capital formation, natural resources, agrarian structure, marketable surplus in agriculture, industrial structure, structural changes, organization, foreign trade, technology, division of labor, and economic system. Non-economic factors mentioned include human resources, political/administrative factors, and social factors. The document provides details on how each of these factors contributes to and influences the rate of economic growth in a country.

1. FACTORS
PROMOTING
ECONOMIC
DEVELOPMENT

2. WHAT IS A FACTOR?
A factor is one one that actively contributes to
the production of a result. The determinants of
economic growth are inter related factors
influencing growth rate of an economy. Economic
growth is a function of multiple socio-economic
variables.

3. DETERMINANATS OF ECONOMIC DEVELOPMENT
ECONOMIC FACTORS NON ECONOMIC FACTORS

4. ECONOMIC FACTORS
PROMOTING DEVELOPMENT
 Capital formation and ICOR
 Natural resources
 Agrarian structure
 Marketable surplus of agriculture
 Industrial structure
 Structural changes
 Organisation
 Foreign trade
 Technology
 Division of labour
 Economic system

5. NON ECONOMIC FACTORS
PROMOTING DEVELOPMENT
 Human resources
 Political and administration factors
 Social factors
 Changes in attitude
Since the economic development can’t be achieved successfully
within duration of one year, it requires combination of various factors for
development. There are mainly two factor of development. Both the economic
and non economic factors play an important role in development.

6. ECONOMIC FACTORS
Economic factors are factors that affect
economy. Every country has set of characteristics such as natural
resources that can influence their ability to build economy known as
economic factors or conditions of economic environment within a
country that influence capacity to further develop economy. The
stock of capital accumulation in most cases settle question whether
at certain point of time county will be able to grow at faster or
slower level.

7. A. CAPITAL FORMATION
In the factors of production i.e land, labour , capital,
entrepreneur and technology. Capital plays an essential role
to produce output. Without capital, production is impossible.
Capital means wealth or money in form assets which yield
income. Eg: land, building. Capital is divided into working,
real, fixed physical and human Capital. Real capita! refers to
physical goods that exist in production of other goods.
EXAMPLE : Tools, Equipment, Machinery.

8. HOUSEHOLDS MORESAVINGS MORE CAPITAL
MORE
PRODUCTION
MORE OUTPUT MORE INCOME
When country’s capital grows, production expands and country gets
richer. Capital factor is now universally admitted that country which wants to
accelerate the pace of growth has no choice, but to save high ratio of
income. If there are more savings, there is more capital Economists State
that, lack of capital. is principal hindrance in process of development and no
development plan will success unless proper supply of capital is not being
done. Capital helps in shaping country in proper way in terms of economic
development.

9. When capital stock increases with time, it is called economic
development with capital formation. When there is more capital,
country can attract foreign investment on large scale. Every
economic system should maintain minimum rate of capital
accumulation.
Capital output ratio is amount of capital needed to
produce one unit of output. The Investment Capital Output Ratio
[ICOR] refers to additional amount of capital required to produce
additional unit of output.
Capital formation depends upon mobilization of savings,
which relies on people who want to save.

10. B. NATURAL RESOURCES
Natural resources are physical
resources naturally available within available within a
country. It includes coal, oil, minerals. Natural resources
are important for rapid development. Availability of
natural resources are essential for economic growth to
take place. A country deficient in these resources may
not develop rapidly. Along with availability of resources,
efficient utilization of there resources are must for
development to take place.

11. USA/UK
Developed
nation
People are
skilled and
educated
workforce
Rapid
development
Better
utilisation of
resources
INIDIA Developing nation
Sufficient resources
but no utilisation
Due to low capital,
economic
backwardness, no
quality of human
resources
No funds towards
allocation for
education
SAUDI ARABIA Developing nation Low resources
But high per capita
income
Modern
technology quality
of human
resources

12. “OTHER THINGS BEING EQUAL, MEN CAN
MAKE BETTER USE OF RICH RESOURCES
THEN THEY CAN OF POOR” – W.A.LEWIS
Natural resources can be developed
through improved technology and increase in
knowledge. What is required is their proper
exploitation through improved techniques so that there
is little wastage. In less developed countries, natural
resources are either unutilized, under-utilized or mis-
utilized, This is one of the reasons of their
backwardness. This is due to economic backwardness
and lack of technological progress.

13. C. AGRARIAN STRUCTURE
Agriculture has been a backbone of our country from
many ages. It plays very important role because it not only
contribute a greater percentage of national income but also
provides employment to lot of people who come from rural
area. Agriculture is the only source of rural livelihood.
Method of cultivation is not only the factor which is taken
into consideration but also includes ownership of land from
view of economy.

14. FACTORS FOR FASTER
AGRICULTURAL GROWTH
• Land reforms
• Modernization of agriculture
• Improved inputs
• Marketing and credit
• Technological changes

15. D. MARKETABLE SURPLUS OF AGRICULTURE
Marketable surplus represents surplus of harvest that can
be sold for profit after farmer sells their crop. This is the only
livelihood of population. It is an indicator of progress in
agricultural sector Enhanced productivity and production in
agriculture and vital for development. Rise in urban population
leads to increase in demand for agricultural products. Demand for
grains increases. If not met would result in scarcity of food. Food
shortage would force a country to import food grain which would
affect balance of payments position. Ex: India faced this situation
in 1976-77.

16. To prevent this situation, every country should also focus on in its
agricultural sector which indirectly increase pace of industrialization.
Agricultural
production increases
Money and income
increases
Rural demand for
consumers goods or
agricultural inputs
Expansion of
industrial sector
Industrial sector
affect agricultural
sector

17. The importance of the marketable surplus in a developing economy
emanates from the fact that the urban industrial population subsists
on it. With the development of an economy. the ratio of the urban
population increases. As a result demand increases for food grains.
This demand must be met adequately; otherwise the consequent
scarcity of food in urban areas will arrest the economic growth.
If some country wants to step-up the pace of
industrialization, it must not allow its agriculture to lag behind. The
supply of the farm products particularly food grains must increase, as
the setting-up of industries in cities attracts a steady flow of
population from the countryside.

18. E. INDUSTRIAL STRUCTURE
In the sectors of economy, Industrial sector is of
great importance in development of country. It is a proven fact
that county with strong industrial sector have shown more
economic growth and had improved national income and promoted
living standard of people. If industrial sector employs more
people, then there would be no poverty. This can be achieved by
giving importance to large scale, small scale and cottage
industries. Industries should use modem level of technology which
lead to high development rate and should adopt capital intensive
techniques.

19. F. STRUCTURAL CHANGES
It is the dramatic shift in a way country or industry or
market operates. It is transformation from traditional agricultural
society to modern industrial society.
It is a radical transformation. It is, a constant
process as economy adjusts to change in pattern of demand.
"In every progressive economy, there has been a steady
shift of employment and investment from essential primary
activities to secondary activities of all kinds to assign greater
extent into tertiary production”.

20. STRUCTURAL CHANGES LEAD TO
• Increase in employment opportunities
• Higher labour productivity
• Stock of capital
• Exploitation of new resources
• Improvement in technology

21. G. ORGANISATION
In the factors of production, entrepreneur plays a key role. Entrepreneur
is a person who set ups business and arranges all factors of production, bearing
most of risk and enjoying most of reward and earning a profit in doing all this. He
is seen as an innovator or source of ideas.
LESS DEVELOPED COUNTRIES LACK ENTRREPRENEUR SKILLS
• Create a climate for encouraging entrepreneur
• Provision of all social, economic and technological
institutions
SOLUTION

22. H. TECHNOLOGICAL PROGRESS
Technology refers to process though which inputs are transformed
into outputs. Technological progress refers to discovery of new is improved
methods of producing goods. Technology relates to new research. Country
should spend high percentage on R &D. It helps country to produce more
through better technology.
CHANGE IN TECHNOLOGY Increase in productivity of labour or
capital production factors
“ INNOVATION IS IMPORTANT TECHNOLOGICAL FACTOR IN
ECONOMIC GROWTH” - SCHUMPETER AND KUZNETS

23. I. DIVISION OF LABOUR
Adam Smith gave much importance to division of labour. Division of labour
is important feature of modern industrial organization. It refers to scheme of
dividing given activity among workers in such a way that each worker is supposed
to do one activity. Division of labour increases output per worker on account of
higher efficiency and specalized skill.
SPECIALISATION DIVISION OF LABOUR INCREASE IN
PRODUCTIVITY
Increase in rate of development
LARGE SCALE PRODUTION
Greater specialization and division of labour

24. • Inventions and discoveries facilitated
• Diversity in employment
• Right man in right place
• Large scale production
• Mechanization is possible
ADVANTAGES OF DIVISION OF LABOUR

25. J. FOREIGN TRADE
Exports and Imports of goods i.e trading activity outside the
jurisdiction limits of country is called foreign trade. Foreign trade of a
country should be minimum of imports and maximum of exports. There should
be foreign investment for high rate of economic development of nation. A
country should aim to become self-reliant. Instead of depending on products
of other nations, we can set up the manufacturing of other products by
encouraging development of setting up Industries and also saves money.
Foreign trade has proved to be beneficial to countries which
have been able to set up industries in relatively short period.
JAPAN AND SOUTH KOREA – Captured international market for industrial
products.

26. K. ECONOMIC SYSTEM
Economic system of a nation also affects
economic development. In previous time, country followed
laissez faire (no government intervention) which maximized
economic progress. Every country needs a system to
determine how to use its productive resources. An economic
system is a system which deals with production, distribution
and consumption of goods and services in particular society.
It is composed of people, institutions and their
relationships.

27. ECONOMIES
CLASSIFIED
INTO
Capitalist
economy
Socialist
economy
Mixed economy
System in which
individuals own and
operate factors of
production. Minimal
interventionist role
of state
System in which
government own and
operates factors of
production and state
intervention play
great role
System
combine
features of
both system

28. REAL FACT
SOCIALIST ECONOMY – Market mechanism allowed
CAPITALIST ECONOMY- State play major role

29. L. OCCUPATIONAL STRUCTURE
The distribution of population according to different
types of occupation is occupational structure. I t is shift from one sector
to another sector.
• Primary sector[developing nations]
• Secondary sector[developing nations]
• Tertiary sector[developed nations]
OCCUPATIONS
CLASSIFIED
INTO