The criteria of Economic growth

Suffice it to say that Economic growth is the indicator of the growth of annual income of a country. The rate of economic growth of a country is the percentage annual change in national income. In case of Bangladesh economy where mixed economic system is prevailing, national output in 1994/95 was valued at Tk.117026 crore (27.53 billion US Dollar) and in 1995/96 it was Tk. 130160 crore (30.62 billion US Dollar). Output grew in value by Tk.13134 crore that gives a nominal growth rate between 1994/95 and 1995/96 of 11.1%. On the other hand, this is not the real change in growth because living standards will only be improved by real changes in output. Some of 11.1% increase in output might be due to inflation. If the inflation rate over the period was 4.1% then the real increase in the value of output was 7%. Given the population growth in the country X is 2.17%, this implies that the real value of output per head grew by 4.83 %(7%-2.17%).





The potential economic growth rate is the rate of growth achievable if all wealth were fully employed and used resourcefully. It is the highest rate at which the economy of a country could nurture. Prospective growth will be exaggerated by any change in resources – natural resources, labor or capital.


Bangladesh is an agriculture-based overpopulated developing country. Political instability, natural calamities, poverty and illiteracy are the common feature of Bangladesh. Following table shows the general condition:







Population


124 million(1997)



Population Growth Rate


2.17%



Area


147570 Sq. K.M.



Literacy(Adult)


42.6%



GDP(at current market value)


Tk.140258 crore (1996-97)



Growth Rate


5.7%



Rate of Savings (Domestic)


7.7%


}of GDP



Total Rate of investment


17.4%



Export


13%



Import


22%



ADP financing by domestic resources


48.93%






With poor natural resources and high unemployment rate Bangladesh is trying to improve its economic condition. For financing Annual Development Programme (ADP) it has to depend on foreign loans, debts and grants, which are about 52%. Still Bangladesh has been experiencing steady economic growth since its independence in 1971. Bangladesh was heavily dependent on agricultural sector. In 1973/74 contribution of agricultural sector to GDP was 48.3% where in 1996/97 it was about 32.4%. However industrial sector does not grow as expected. Its contribution remains almost same, as it was 11.1% in 1973/74. Political instability and inconsistent economic and industrial policy might have the consequent reasons. Other professional and commercial service sectors are rising from 36% to about 50%. Rural people living below poverty level were 73% in 1973/74. It falls to 50% in 1991/92. Infant mortality rate fell from 154 per thousand in 1970s to 80 per thousand in 1990s. Females that were ideal are coming to the garments industry. About one million females are now working in the garments industry. Per catia income rises from Tk.3066 in 1980/84 to Tk.11284 in 1996/97.





The following table and graph show the economic growth of Bangladesh over recent seven years.






Rate of Growth of Gross Domestic Product


















Year


Growth Rate of GDP(%)



1990/91


3.4



1991/92


4.2



1992/93


4.5



1993/94


4.2



1994/95


4.4



1995/96


5.3



1996/97


5.7






Table: Growth rate of GDP





















(Valued at price 0f 194/85)








From aforementioned table and chart, it is evident that Bangladesh has been practicing a considerable economic growth over the past years. The growth rate given here is adjusted with the inflation rate. Actually, a country’s national economic growth depends on annual demand where savings, government spending as well the trend and overall position of surplus. Such surplus depend on the difference between balance of export and import. Export done more in a year, the nature of consumer price index becomes positive and inflation rate may prevail in favorable side.