Measure # 1. Capital Formation:
Capital plays a strategic role in the process of development of a country, at least in its initial stages. According to the Harrod-Domar Model, economic growth depends directly on the saving ratio and inversely on the incremental capital-output ratio.
So, an LDC must generate a high rate of saving—so as to accelerate the rate of capital formation. People must be able and willing to devote a substantial portion of their production to building capital rather than to present consumption.
There is wide agreement among economists that lack of capital is the biggest obstacle to growth. No plan for development is likely to succeed unless adequate supply of capital is forth-coming. A country must save at least 25-30% of its income every year in order to achieve a steady growth of national and per capita incomes. Japan has achieved this target in the post-Second World War (1939-45) period. Germany, Italy, Australia and Finland have also succeed in saving 20% or more of their national income and have achieved high rates of growth in recent years.
Measure # 2. Reducing Population Growth:
A second way of accelerating growth is by striking a balance between the birth rate and the death rate. If this can be done, the population problem can be solved and the standard of living can be improved. Over-population is-often seen as a growth-retarding factor. Thus, if a country can manage to use its manpower properly, it will certainly prove to be an important factor in development.
Measure # 3. Technological Progress:
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It has been statistically established that the level of technical know-how has a direct bearing on the pace of development. With the advance of science and technological knowledge, people discover more and more sophisticated techniques of production which gradually raise the levels of productivity in the key areas of the economy. Technological progress may refer to either product innovation (development of a new production) or process innovation (development of a new way of producing an old product at lower cost).
According to J. Schumpeter, technological progress has been the engine of growth in developed countries. R. M. Solow and D. Robertson have observed that this has been the most important source of growth in the USA between 1909 and 1949. This is called ‘the residual factor’ of growth. It has the effect of raising productivity of resources.
Thus, it is essential for social and economic systems of a country to generate a high rate of scientific discovery and technological change in order to avoid the effects of diminishing returns and exhaustible resources.
Measure # 4. Better and Full Utilisation of Resources:
Finally, an economy has to operate at its potential capacity or very close to it. The failure to use productive capacity fully has been one of the chief reasons for the inability of the economy to achieve its full growth potential. While, in developed capitalist countries, the capacity of the economy to produce outruns the ability of consumers to buy the output, in LDCs like India purchasing power either does not keep pace with the potential growth of the economy or it declines, thus creating a gap between the actual level of spending and that required for full use of productive capacity.
Measure # 5. The Desire to Grow:
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Growth is not a mechanical process. It is a human enterprise and depends ultimately on the skill, quality and attitudes of the people. Without people’s participation growth is unlikely to occur.