What are the factors which are indicators of economic growth?

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Indicators of Economic Growth

1. National Income:

Increase in rate of growth of real national income is an important measure of economic growth. Higher the rate of growth on national income, bigger will be the cake from which distribution to various citizens will take place. All the citizens will benefit if population growth is not very high, rate of investment is stable and income inequality is reduced.

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2. Per Capital Income:

If national income increases but population is increasing at a fasted then income available with each individual decreases. It is therefore important for national in to grow at higher rate than population growth to increase the welfare of the people.

3. Per Capita Consumption:

Ultimately, an individual earns income to consume-either at pre or in future. They can postpone their current consumption in order to purchase durable proc at a later time. Postponement of consumption, per se, does not decrease national well Postponement of consumption is necessary in underdeveloped countries to increase save which lead to increase in capital formation.

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The impact of postponement of consumption underdeveloped countries and developed countries is totally different. Increase in saving developed countries leads to decrease in effective aggregate demand bringing recession conditions in the economy.

This can pull the national income to lower level. But in cast underdeveloped countries, increase in saving can create new investment opportunities lead to increase in national income in future. Stressing too much on saving at the cost of produced essential goods can have an adverse impact on welfare. The case in point is that of form USSR.

They concentrated too much on investment and production of defence equipment people had to go without essential products. This led to political unrest and breakdown USSR.

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