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CHAPTER I1
REXIEW OF LITERATURE
This chapter provides a brief resume of the
earlier research efforts relating to income, saving and
investment of households. The reviews are arranged in
chronological order.
A study of Modigliani (1949) on the fluctuations
in the Saving-Income Ratio found that the average saving
rate 'tends to be proportional to per capita income under
conditions of steady growth and the saving rate is
positively associated with the rate of growth of Gross
National Product (GNP). Friedman 1 1 9 5 7 ) exarnlned the
theoretical hypothesis of a marginal propensity to save
equal to unity (appears to be debatable) in the case of
transitory income, however, the results obtaiced seem to
vary considerably according to the definition adopted for
permanent income.
In the opinion of Schultz (1964) the cause of low
savings rate amongst rural households is due to few
investment outlets for potential savers, and one necessarily
due to low income and the small retes of return. Houthakker
(1965) made a study on some determinants of savings in
Developed and Under-Developed countries. He examined that
the number of dependent persons young or old affects the
average propensity to save more than per capita saving. The
proportion of dependents reduces the potential for saving.
Household size has an effect on the savings threshold. In
columbia, the addition of one person in relation to the
average size produces a variation of 2 per cent in
consumption and 10 per cent in savings. The size of the
home does have an effect, with savings declining as the
number of persons increases. When more persons in a
household are working, the motivation is additional saving.
with:regard to the educational factor, it is found that at a
given income level, the propensity to consume increases with
the level of education. Households with a lower level of
education have a relatively high transitory income.
However, education may have more effect on the allocation of
savings t h a n on their level. Shukla (1965) attempted to
assess the Capital Formation in Indian Agriculture by using
the secondary data and found that the dominance of savings
over investment.
Friend Irwin and Taubman (1966) observed that
the propensity to save relates to deferent socio-economic
characteristics of households (education and occupation).
The marginal propensity to save from transitory income is
higher than it is in the case of permanent income (which may
not be far from what it is in relation to current income).
However, the opposite result is found in urban areas of
India. Savings from permanent income are intended for the
accumulation of assets to serve specific functions. Saving
is stable over time and that it depends greatly upon past
savings. 'The possession of physical assets significantly
affects household saving (net or per person). In rural
areas, both in India and in Indonesia, average and
marginal propensities to save increase with the alllourlt of
land possessed. The income level of the agricultural group
being subject to grater fluctuations. The co-efficient of
adaptability to change of income level is negative in the
agricultural group. While it is nil for the non-
agricultural group, which is more easily able to forecast
its future income level correctly.
Lokanathan (1967) concerned with the households
saving surveys, being made in urban areas and in ruial
areas. Contrary to the situation in developed countries,
households that won their homes have a lower saving rate
than those renting their dwellings (but only one third are
in debt). Further, over the age of 65, the saving rate 1s
very high, which is probably linked to the existence of
extended families. Self-employed workers have very high
average and marginal rate of saving because of the equipment
needs and the irregularity of their income. Actually, this
group is heterogeneous and comprises two categories: small
enterprises (20 per cent ) and handicraftmen ( 5 per cent ) .
'I'll- ::I ~i(i). 1 1 1 Choudhury (1968) nl t r~lipred to
examine tilt? household saving by coi~su~nptioll bellavlour i11
India by fitting a set of function for rural and urban
households as well as for all households together. The
study relies on secondary data collected during the period
between 1950- 51 to 1962-63. The major findings of the
study are the rate of household savings has increased
substantially since 1970-71. This increase has mainly been
due t < ) t h r increase i n households savings in financial
assets. l'lle rate of hoi~sei~old savirlgs in physical assets
ticis n o t ci~;lrigcci vei y rnl~cl~ since 1970-71, though there is
some incraas? over the short pe~iod of 1976-79 to 1980-81.
To understand more the saving behaviour of the households,
it is observed from the functional relationships that both
the variables viz . , ( personal disposable Income and
household cavings in financial assets), change
proportionately. It is further observed that the saving
rises faster than income. In the study, four different
functional forms are fitted on the data for the period 1950-
51 to 1962-63. An exmination of the results suggested that
the linear relations present with correct signs. The
statistical measure of R~ also carries the higher value in
this case. At the aggregate level and for urban households,
the logarit-hmic linear relation also gives meaningful
rc?sults wit!i illcome elasticity of saviiig greater than unity
but comparatively lower values of R~ . The marginal rate of
saving is still low. Income elasticity of financial saving
is higher than unity, but substantially smaller than that
of urban households when total household savings are
considered. Clark (1968) observed the population growth
has positive effect on saving and that larger family size
does not reduce the average propensity to save.
Kelly and Wiliamson (1968) studied the influence
of the age of the wage earner on the saving rate. Using an
Indonesian household survey, they tested the hypothesis that
people attempt to spread their life time consumption evenly
over their life tlme by accumulating enough saving during
their earning years to maintain their consumption standard
when earned income will be less durinq the retirement
period.
A study of Subramanian Swamy (1968) on "A Dynamic
Personal Saving Function and it's Long-run Implications",
based on the empirical studies for developing, countries
showed divcrgcnt ~ n i ~ r g i ~ l ~ ~ l 1 1 1 0 p c 1 i u i L i c ~ i L O U I I V ~ (1111 0 1
permanent and transitory income. Two alternative
specifications of the permanent income hypntheses are found
in the studies of saving behaviour, the Asset Adjustment
Approach and the Growth Rate of Income Model. In Asset
accumulation of assets which perform the specific function
for the saver. One assumption is that the desired level of
asset is a direct function of permanent income and that the
desired stock of assets is acquired only over a fairly long
period af time. The saving function is highly dependent upon
past saving behaviour and is fairly stable over time.
Desai (1969) attempted to study on "Level and
Pattern of Investment in Agricultural Households". A cross
sectional analysis is used in a progressive and a backward
area of Central Gujarat. It is observed that the factors
Viz., size of operational holdings, family size, net
household income, extent of commercialisation,extent of
irrigated area and current borrowing are the major
determinants of investment. It is found that the family size
exerted low, insignificant and negative influence on durable
variable which explained the difference in the behaviour of
farmers in the two regions.
Leff (1969) proposed and tested the hypothesis
that the higher the proportion of household members who
consume more than they produce (dependents), the low will be
the household average saving. Using a seventy four country
cross-section sample, it was inferred that the dependency
ratio has a significant negative effect on saving. The study
of Chauhan and Agarwal (1970) on "Magnitude and Pattern of
Form Investment in Rajasthann, used the multiple regression
model of investment and determined the factors influencing
on investment. They found that age of the head of the family
and the number of members in the family exerted influence on
investment.
A study of Gupta (1970) "On Some Determinants of
Rural and Urban Household Saving Behaviour", found that the
marginal Propensity to save is higher in urban sector over
that of the rural sector. Moreover, in both the sectors the
marginal propensity to save tends to increase with per
capita income and a redistribution of income from rural to
urban household will lead to higher aggregate household
saving. Further, it is observed that the urban household
oavir?g out of the permanent inco~n~ in India is higher when
compared to that of the rural sector. On the other hand, the
marginal propensity to save iMPS)out of transitory income of
the rural sector is greats than the marginal propensity to
save IMPS) cut of permanent income, the reverse being true
for the urban sector. Panikar (1970) attempted to study on
Rural Savings in India and found that the propensity to save
of the rural sector is grater than the urban sector.
Gupta (1972) examined the two propositions. The
currency holding by the public locks up real resources. The
real resources so locked up are socially infructuous. THe
social marginal productivity of real resources congealed in
the form of currency is zero or substantially lower than
what it would be in alternative uses and that consequently
their release through saving deposit mobilisation would make
them available for socially productive uses. The suggested
policy implications are (i) Encouragement to a greater
mobilization of savings and (ii) Encouragement to higher
overall monetized and non monetized rate of savings.
Singh (1972) attempted to examine "The
Determinants of Aggregate Savings", and found that there is
a significant correlation between the average rate of saving
and income growing at a steady rate. Moreover, the average
saving rate is related to the rate of growth of Income.
According to Mckinnon (1973), while examining the role of
money and capital in economic development, the capital is
misaliocated in the rural areas due to relative absence of
financial intermediaries.
Peck (1974) examined whether increasing population
and growth rates retard or stimulate household savings using
data from Philippines statistical survey of household, for
1961,1965 and 1971. These data are for 12 income groups and
three geographical areas (Rural, Manila and other urban).
'I'lie quality of the data ~nelitiolied is xaLlie~' y u o ~ . I t is
Inferred that the dependency burden has a negative impact on
the saving rate, which is only to a small extent, offset by
economies of scale in consumption.
Snyder (1974) examined saving attitude of
households with respect to many socio-economic variables.
The tests are mainly related either to large samples over
time involving both developed and developing countries or
different countries of Asia or the Pacific. It is inferred
that the current income is a significant determinant of
household saving. The variability of the average propensity
to save depends upon the relative importance of other
explanatory variables of household behaviour. The marginal
propensity to save which appears to increase along with
income at the lower income levels, seemed to be lower in the
developing countries of Asia than in developed countries. In
addition, it is not always higher than the average
propensity. The marginal propensity to save may be higher in
urban areas than in rural areas. The propensitites to save
vary according to source of income.
Sen (1975) examined the effects of inflation and
analysed the efficacy of index linking in ameliorating the
adverse effects on savings and investment in developing
countries with the help of reviewing the earlier empirical
studies. It is observed that even index-linking has a
positive effects upon savings and investment. There has been
little experimentation with index linking that too aimed at
very specilic and limited objectives in a few developing
countries.
Kelly (1976) tested three equation models used on
households survey of 2436 United States Urban families. A
few inferences are drawn it is observed that the direct
impact of family size on saving is negative. However,this
simultaneous equation model has also specified a number of
indirect effects of family size on savings. The hypothesis
stated that "a portion of the cost of additional children is
financed out of a reduction of consumption by other
household members". Children exert an influence on the level
of household earnings. family size is determined
endogenously with respect to economic factors. Taking thee
indirect effects into account, the impact of family size on
savings is ambiguous depending on the source of the change
in family size.
Subramanian (1977) had found in a study on
consumption, saving and investment of farm households in
coirnbatore that contribution of agriculture to total income
is about 84.6 per cent in developed areas and 48.4 percent
in undeveloped areas. The dis-saving behaviour is observed
among the farm households. Bhalla (1978) examined the
sources of income effect on rural savings based on the
national Council of Applied Economic Research (NCAER) data.
It is observed that the propensity to save out of non-
agricultural income is higher than the propensity to save
out of the agricultural income.
Musgrave (1978) observed that some forms of
savings accumulation are probably under estimated. The great
majority of households has no financial assets not even a
bank account. However, such assets do appear at high income
levels and their frequency depends upon the rates of return
offered. Most of the households has assets of own house or
ill tlle process of purchasing olie. The acquisitioll of assets
depend upon the income level and income generating assets
such as a house, a motor car, a bank account, shares and
others. Only the high-income households exercise a choice
among different assets. If imputed rents are excluded, the
concentration of income from capital is very high in many
LOW-income nouseholds own their homes. The level of saving
increases rapidly when income, which is t h ~ decisive factor
ln saving growth. The proportion of permanent income devoted
to saving increases with income. It is scarcely possible for
households to anticipate their level of real income in the
long term. Because, it is difficult for them to lend or
borrow freely in order to make necessary adjustments between
capacity to save and needs. The rate of saving is relatively
higher among the elder of the households. The behaviour of
the rural households relate mainly to Asia showed that the
amount of land held appeared to have a great effect on
capacity to save. It is observed that there is a significant
increase in the average propensity to save on both large and
small farms size.
Bilsborrow Richard (1979) examined a micro level
study On age distribution and savings rates in less
developed countriesm. It is found that higher population
growth rate associated with a larger family size would
reduce the saving. On the other hand, household size may
interact with income and consumption because a higher family
size might mean a higher level of income through an
increase in the number of earners and economics of scale in
consumption. The small proportion of population which saves I
in developing countries, the partial substitutability of one
source of savings for another and the adaptability of
household to change in dependency as the factors responsible
for this.
I Narayana ( 1 9 7 9 ) attempted to study on Income,
Saving and Investment of Household Sector in Chittor
District during the Period 1973-74. Primary data are use for
the analyses of the study. Stratified sampling method is
adopted for the selection of the sample households. The
total size of sample households is about 1650. Out of which
1200 for rural area and 450 for the urban area. The study
pertains to the middle income groups whose annual income
ranged between Rs. 1,500 to Rs.25,000. It assessed the
impact of the socio-economic factors such as the size of
household, the level of earners, the level of education, age
of the chief earner and the occupation of the households on
income generation, saving formation and investment decisicn.
The study of S h a m (1979) on "Saving behaviour of the
Household S e c t o r n , found that nearly 70 percent of the
households saved positively and there is not much
-3 8 significant difference between the rural and urban
households. Adiseshiah (1980) analysed Savings and
Investment in India with macro perspective during the period
1970-71 and 1979-80. He observed that the savings rate
(16.9%) and investment rate (17.9%) have been increased to
23.5 per cent and 24.8 per cent respectively during the
period. It is also observed that the investment rate exceeds
the saving rate in India due to the inflow and outflow of
capital transf ers . The inequalities in income distribution
has been increased. The proportion of saving is more among
the non-farm sector compared to tile farm sector. The
productive investment becomes profitable investment when
capital utilised with full capacity in a short gestation
period.
A study of Kuznets (1980) on the saving behaviour
of 70 couptries showed that the personal saving is
positively correlated to personal disposable lncome. The
Reports of NCAER (1980) observed that the effect of age on
saving is quite significant, as supported by the fact that
tile observed saving income ratio is small for young groups,
high for middle age groups and again low among older age
groups.
Shetty (1980) reviewed the trends in domestic
saving rate in India during the 1980s. In reviewing the
behaviour of the household saving, it is observed that the
total household saving rate and the saving ratio (gross)
attained peak at 17.0% in 1978-79 and fell to 16.9% In 1988-
89. The rate of gross financial savings rose from 4.7% in
1970-71 to 10.2% in 1988-89. Whereas,the rate of physical
assets formation increased from 8.1% in 1970-71 to 9.8% In
1980-81. The share of household savings (gross) to the
personal disposable income has increased from 13.8 in 1970-
71 to 21.9% in 1987-88. The non farm household income has
grown at a significantly faster rate during the 1980s. The
average compound growth in the non-farm income has been
tnucll t i igi icr than in ill the farm income. The share of
disposable income of non-farm households whose savlng
propensity is much higher than that of the farm households.
All relevant studies on saving suggest that the non-farm
households possessed significantly better saving potential
and saving propensity than farm households.
A study conducted By Sharma (1980) about the
behaviour of household saving in India with a macro
perspective revealed that the household saving has shown
upward trend over the decade 1968-69 to 1977-78 with
fluctuations. Moreover, it is observed that the shares and
securities command more liquidity as compared to physical
assets. Saving in the form of provident funds could be made
more attractive by enhancing the rate of return. The fixed
savings in the form of provident funds and insurance
policies are the progressive erosion in the value of rupee.
Wolf (1982) examined the Modigliani - Bermberg
(M-B) model as an explanation of variation of wealth
holdings among households. In the model the estimates of
households lifetime earnings explain only a minute portion
of the variation in households wealth. Among certain groups
such as non-white, rural residents, and the low educated the
coefficients of the regression model are insignificant.
Moreover, the top wealth holders are removed from the sample
and non-cash financial and business assets are eliminated
from the household portfolios, the explanatory power of the
M-B model increased markedly. Essentially, the validity of
life-cycle wealth accumulation model must be restricted to
white, urbar:, educated middle classes and their accumulation
of housing, durables and cash. The rich people has very
different motives for saving and very different sources of
saving. Whezeas, the poor do not earn sufficient income over
their lifetime to accumulate the non-negligible wealth.
Sharan (1984) attempted to examine the savings in
Rural India: An Analysis of Major Determinants tested the
poor performance of savings by analysing the attitudes,
demographic consideration and interest rate and prices,
based on reviewing the various earlier studies. The analysis
of the major determinants of rural saving made it clear that
some of the factors influenced it in a positive direction,
while the others pulled it into a negative zone. There is an
aptitude to save among the rural people either because they
are more oriented to wealth accumulation or they preferred
to abstain from luxurious sophisticated consumption,
conscious of their old age requirements. But in food prices
and emergence of transitory income in some cases facilitated
lie savings. But, the low level of education and high
dependency ratio arrested any growth in savings. So any
attempt to raise rural savings on these lines would be a
successful venture.
Ashok Kumar' and Jagadeswara Rao (1985) examined
~ ! i e applicability of Goale-hoover-Enke-Demeny hypothesis
i l l ich states that higher family size would mean a reduction
In saving to Indian saving behaviour. They also assessed the
lmpact of age distribution and household size on household
naving behaviour in India and examined the urban-rural
differences in the effect of demographic variables on
I!ousehold saving behaviour in India. The sample households
include 3015 rural households chosen form 237 villages and
2110 urban households from150 cities/towns in India. The
x3;or findings of the study are. There is an inverse
relationship between the level of household saving and
1'2eel.old size In both rural and urban as well as all Indla
-uvld~ng evldence In support of Coale-Hoover-Enke-Demeny
l ~thesls whlch states that hlgher rates of population
i l y d t h would exert negatlve Influence on savlng rates and
thereby on economic growth. It is observed that the higher
the proportion of non-earning dependents, the low will be
the household average saving showing an inverse relationship
between these two variables.
The results indicate the differential effect of
household size on the households saving across different age
group in rural India. But, this is not true in the case of
urban India. Among different age groups, middle 1 3 0 - 5 9
years) age group of households exhibited differential
hchavioi~r form those of young (below 30 y w r r . and old (60
and above vears) age groups of the households. There are
differences b~tween the rural and urban ar.Pas regarding the
effect of demographic variables on household saving
behaviour. The level of income is one of the major
determinants of savings. Raising the real income over the
several decades lead to a considerable increase in the
saving ratio. Tne inequality of income exists due to the
Inequality of wealth.
According to Granousky (1986) in his paper Saving
and Economic Growth in India drew certain findings. The
factors such as top income brackets in the household sector
1s also one of the vital factors to accelerate the growth of
savings in India. The savings also played a major role in
financial intermediaries. One of the major characteristics
of househbld saving behaviour is he change in the
composition of structure of savings in terms of physical and
financial assets. The higher income group of non-cultivator
households invested on non-farm activities. The financial
intermediaries became important to mobilize financial
savings of the upper income brackets of rural households.
The share of small and marginal land owner's saving and
investment have increased because of the increase their
share of land ownership which is mainly consequence of sub-
divisions of larger farms due to demographic pressure and
other social conditions.
A study of R.Rajkumar (1986) on household savings,
determinants, and motivations, observed that the households
fact continuing decline in the value of money caused by
inflation. Therefore, the households realising that making
of investment on consumer durables and other kinds of
physical assets like agricultural lands, urban sites, houses
and jewelry is more worthwhile than holding the savings in
financial forms. This is so because " it is primarily the
rate of change of commodity prices that wealth holders
compare with xiomir~al rates of interest on f inancia1 assets.
The households are deciding to save their money in the form
of physical goods". It is also found that the salaried group
of the households saves more in the form of contractual
financial savings such as life insurance and provident
funds.
Another study attempted by Joshil (1988) examined
tlle saving bel~aviour ill India for the period between 1950-51
n ~ l t l 1978-71. nnnr 'd nu 1-Ire n e r o ~ ~ r i ; l r y d a t a nvpr t 1 1 ~ per iod of
3 0 years, the author drew some observations. Over the study
periods, the share of financial assets in total domestic
saving increased sharply from 12.8% in 1950-51 to 52% in
1978-79. On the other harid, the share of physical assets
declined steeply from 87.2% to 48%. The ratio of financial
assets to income has rise from less than 1.5 per cent ln
1950-51 to 8.3 per cent in 1978-79 which reflects the
impressive growth in financial assets. During the period,
the combined share of currency and bank deposits in total
net financial assets rose rather from 11% to 35%.
Conversely, the share of contractual saving in the form of
life insurance and provident funds increased at a lower rate
from 8% to 16% during the same period (i.e. 1950-51 to
1978-79).
Subramanian (1989) examined the income, saving and
investment of farm households in Pondicherry region. The
study mainly relied on primary data collected durlng the
period between 1983-86 from a sample 500 farm households of
20 revenue villages using the multistage random sampling
method. The sample farm households are stratified into four
groups namely marginal, small, medium and large farm
households. Conventional tabular, average and percentage,
Gini ratio, Lorenz curve, Correlation analysis are used to
test the formulated hypotheses. The objectives of the study
a1 r. t r ) ;tnnr!in I l l c p a r t P T I I (1f i l ~ r . o ~ l l r , n i l v i l i ~ j illid i ilvrX!it I I I P I ~ ~ o f
farm households to identify the determinants of farm
investments and savings and to evaluate the saving and
investment propensities of the farm households. It is
observed that there is an inverse relationship between the
farm size and income per hectare. Farm investment is
influenced by farm size and income. Saving-income ratio is
positively related to farm size. Investment in modern assets
dominate the farm investment pattern.
Bhatty, Natarajan and Malvea (1991) examined about
the distribution of households by Socio-Economic
Characteristic in 1986. The households are broadly
classified into three income groups 1) low income group
(Rs11,000), 2 ) Lower middle income groups (Rs, 11,001- Rs
22,000) . and 3 ) Middle and high income groups (aove Rs.
22,000). It is inferred that the proportion of households in
the lowest income class at the All India level has been
declining. The proportion of households in the lowest income
class is considerably lower in urban than in rural areas.
The NCAER (1993) study on mobilisation of
household savings for housing is based on a larger-scale
household survey of households spread over 40 sample towns
from 13 major states of India. The study focuses on the
following aspects (i) the zonal/regional differences in
i v ~ liq heliaviour. ( i i i the housinq-link~d savinq l~~l~aviour
I L J ~ d~fferent groups by lncome and tenurlal status and (111)
a separate detailed account of the behavlour of
slum/permanent jewelers with respect to savings linked with
ilousrng. The hypothesis states that the income wealth earner
rdtlo influences the financial savlngs of the households
positively. A general version of the model can be presented
P s i . BO t B l H I i t B 2 WLi + B3 H S i t B4 ERi t B5 P S l i t
B 6 P S 2 i . t B7 S W 2 i ~ t B9 PTRi t B10 GRi t Ei
;':.e notations are
H I i = Annual household income (Rs.)
WLi = Wealth (Rs.)
H S i = Household size
ERi = Earner - ratio (the proportion of eanrrs to llousehold size
P S l i & P S 2 i = Planned for housing
S W l i & SW2i = Sewer system
PTRi = Public transport
GRi = growth of urban population, the dummy variables
Ei = OCl,OC2,OC3 h OC4 = Occupations; Salary earner, Wage earner, Self-employed (business) and self employed (professional) respectively. The groups left out is the Other category.
It is found that the income and wealth influence
zusltively the household savings. Anlong the savings of -..the
Li~c occupdliul~:~ uF Llie Iiuusehul~ln, Ll~e fialaried mid business
households made a positive effect on financial savings. But,
the wage earner had a negative influence on financial
savings of the households in the urban households. made a
negative impact on household finarlcial savings. The low
income group and the middle income group together accoun~ed
for 6 2 . 7 3 % of households who hold 6 9 . 4 4 % of the total
financial savings. The top income groups Viz., upper middle
and high income groups account for 8 . 1 3 % of the total
households having 2 6 . 4 8 % of the financial savings. In terms
of occupatlon,the largest concentration of households is in
the group of salary earners ( 5 2 . 6 % ) and Self-employed
business ( 2 1 . 2 2 % ) . Their corresponding share in financial
savings is 6 2 . 2 % and 2 0 . 9 % respectively. These two groups
accounted for 8 3 . 1 % of the financial savings. In teams of
educational status, 7 0 . 0 % of the total financial savings
come under the two groups those headed by people (i) having
education up to high school and (ii) having education up to
college level. The households headed by persons with above
college level education constituted only 1 0 . 6 7 % of the
households and they possess 1 8 . 8 % of the financial savings.
The motivation among the three categories- those with head
having high school education, college and above college
education is stronger than among the rest of the groups.
Anartya Sen (1993) examined the concept of
development and the way out in the modern context. He has
r . 1 i t I < , , I I 1 y v inwrt l t t ~ ~ f 11r:iliq t I ~ P Ila~ r?(I-Dolnar model with an
assunred capital-output ratio, s i n g e r argues t l i , l t a country
with 6% savings and a population growth rate of 1.25% will
be a stationary economy. While Ghana has managed an
investment and savings ratio of just below 6% (5% to be
exact, it has had a populatio~i growth between 2.4 and 3%
during these decades as opposed to singer assumption of
1.25%. Rather than being stationary Ghana has accordingly
slipped back, going down at about 1% a year.
Further, for three of the low-income countries,
namely China, Bangladesh and Afghanisthan, the Gross Net
Product (GNP) growth figures are not given in World
Development Report (WDR) and they have been approximately
identified with Gross Domestic Product (GDP) growth. The
fourteen low-incorne countries vary in terms of growth rate
of GNP per capita during 1960-80 from minus 0 . 7 % In Uganda
1.3% in Bangladesh and 1.4% in India to 3.7% in China. The
top three countries in terms of economic growth are China's
( 3 . 7 % ) , Pakistan 2.8" and SriLarlka 2.4%. Note that China's
pre-eminent position would be unaffected even if the
approximated growth figure is substantially cut. In the
middle-income group, the gr0wt.h performance again varies a
great deal, ranging from minus 1.0% for Ghana to 8.6% for
Romania. The top three countries in terms of economic
growth are Romania 8.65, South Korea 7 % , Yugoslavia 5.41, of
the three top growth-performers, two also have the highest
share of growth domestic investment in GDP, namely SriLanka
with 36% and China with 3 1 % , Pakistan comes lower, though it
does fall in the top half of the class of fourteen
countries.
He viewed that the traditional development
economics has not been particularly unsuccessful in
identifying the factors that lead to economic growth in
developing countries. In the field of causation of growth,
there is much life left in traditional analysis.
The traditional development economics has bee less
successful in characterising economic development, which
involves expansion of people's capabilities. For this,
economic growth is only a means and often not a very
efficient means either. Further, supplementing data on GNP
per capita by income distributional information is quite
inadequate to mee: the challange of development analysis.
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