There are mainly two types of determinants (factors) which influence the economic development of a country.
a) Economic Factors in Economic Development:
i) Capital Formation: The strategic role of capital in raising the level of production has traditionally been acknowledged in economics.
ii) Natural Resources: The principal factor affecting the development of an economy is the natural resources. Among the natural resources, the land area and the quality of the soil, forest wealth, good river system, minerals and oil-resources, good and bracing climate, etc., are included. For economic growth, the existence of natural resources in abundance is essential.
iii) Marketable Surplus of Agriculture: Increase in agricultural production accompanied by a rise in productivity is important from the point of view of the development of a country. But what is more important is that the marketable surplus of agriculture increases.
v) Conditions in Foreign Trade: Foreign trade has proved to be beneficial to countries which have been able to set-up industries in a relatively short period. These countries sooner or later captured international markets for their industrial products. Therefore, a developing country should not only try to become self-reliant in capital equipment as well as other industrial products as early as possible, but it should also attempt to push the development of its industries to such a high level that in course of time manufactured goods replace the primary products as the country’s principal exports
vi) Economic System: The economic system and the historical setting of a country also decide the development prospects to a great extent. There was a time when a country could have a laissez faire economy and yet face no difficulty in making economic progress. In today’s entirely different world situation, a country would find it difficult to grow along the England’s path of development.
b) Non-Economic Factors in Economic Development:
i) Human Resources: Human resources are an important factor in economic development. Man provides labour power for production and if in a country labour is efficient and skilled, its capacity to contribute to growth will decidedly be high.
ii) Technical Know-How and General Education: It has never been, doubted that the level of technical know-how has a direct bearing on the pace of development. As the scientific and technological knowledge advances, man discovers more and more sophisticated techniques of production which steadily raise the productivity level.
iii) Political Freedom: Political freedom is necessary for economic development.
iv) Social Organization: Mass participation in development programs is a pre-condition for accelerating the growth process. However, people show interest in the development activity only when they feel that the fruits of growth will be fairly distributed.
v) Corruption: Corruption is rampant in developing countries at various levels and it operates as a negative factor in their growth process. Until and unless these countries root-out corruption in their administrative system, it is most natural that the capitalists, traders and other powerful economic classes will continue to exploit national resources in their personal interests.
vi) Desire to Develop: Development activity is not a mechanical process. The pace of economic growth in any country depends to a great extent on people’s desire to develop.