Question

‘What matters for growth is not so much the rate of investment but the efficiency with which it is used and the policy environment in which it takes place.’ Discuss using relevant data and literature relating to at least two developing countries.

Answer 1

Rate of investment is considered as less important indicator of economic growth nowadays. It surely helps stretch the growth but what matters the most is efficiency. More Investment increases greater aggregate demand and more capital buying. If aggregate demand increases, the economic growth increases too.

Efficiency on the other hand is a very important concept which helps drive the economic growth in the most developing countries like India or Nigeria.

In India, there is a huge amount of young population present which can help it grow. It can have maximum labor for domestic purpose and for exports also. They just need to be shown the right direction with the help of government programmes. The efficiency if achieved in the workers, can help build the economy to the next level. To some extent, it has been seen in India already till now.

In Nigeria, efficiency in power has helped achieving a considerate number of residential in the economy. The country was suffering from the lack of energy. The demand of energy was more and the supply was relatively less. It was required to have power efficiency in order to have most of the residential set up with proper power connection.