Synonyms

Growth

Definition

The sustainable growth rate (SGR) is the maximum rate of growth that a company can sustain without having to finance growth with additional equity or debt. The SGR involves maximizing sales and revenue growth without increasing financial leverage. In a firm level, a sustainable rate of growth is the maximum growth rate that a firm is able to maintain without raising the fund flow. For a small company owner, the rate is how much more money he can collect each year without investing his own money or borrowing from the bank. Both small and big business owners should calculate their sustainable rate of growth to determine whether their capital is adequate to meet their strategic needs for growth (Higgins 1981).

Sustainable economic growth means a rate of growth that can be maintained, especially for future generations, without causing other important economic problems. There is a compromise between current rapid economic growth and future growth. Today, rapid growth may exhaust resources and cause environmental problems to future generations, including oil and fish depletion and global warming (Daly and Townsend 2003).

Measuring Growth

Growth can be evaluated in the light of a general trend as an annual rise in real GDP. The lengthy term noninflationary average economic growth rate is the trend rate of growth (Economics Online 2019). If growth increases substantially above or below the trend, excessive growth or low development will occur in the economy. The economic downturn or recessions take place if the rate is negative for two quarters or more in a row. Therefore, standard growth potential estimates that view inflation as the only indicator of macroeconomic disequilibrium, together with inflation stability, have supplied the policymakers with false signals. This article presents an alternative to prospective growth methodology to achieve viable growth rates. Sustainable development is described as a development of production which, through a broad variety of national and external factors, does not produce or expand macroeconomic imbalances (Alberola et al. 2013).

In the majority of countries, even the UK, GDP is the formal basic metric of production utilized. Gross measurements record the total cost of all products and services, including equipment bought as a substitute for current equipment. Capital substitution is referred to as capital use or decrease. Net production is an alternative to aggregate output. This means that depreciation is taken into consideration and deducted from the gross values. Revenues from property relate to revenues generated through different kinds of foreign investments such as earnings and dividends. When added, the measure is transformed into a domestic item known as the GNP.

Business is considered in the modern world as the chance to create wealth, financial prosperity, and employment. Market economies, however, depend on the organization’s integrity to operate within societal values and norms (Kanji 2007). When real output increases over time, economic growth occurs. Gross Domestic Product (GDP) measures the real output at constant prices, thereby eliminating the impact of price increases on national value output. Growth periods are often triggered by an increase of aggregated demand, such as an increase in consumer expenditure. Any extra demand will push the price level up if production does not increase.

Inclusive Sustainable Growth

The assistance of the United Nations Development Programme (UNDP) for sustainable and inclusive development enables individuals to contribute to financial development and profit from it with minimal environmental impacts. We think it helps to bridge the financial, social, and environmental gaps for viable development by generating circumstances for inclusive growth. The United Nations (UNDP) works widely with other United Nations organizations and development actors including IFIs (International Financial Instititutions), private foundations, the private sector, and civil society to help nations in pursuing inclusive and sustainable policies for growth. The three broad policy priorities that frame UNDP’s support to achieve inclusive and sustainable growth are as follows:

  • Inclusive- and sustainable-growth-integrated planning. Activities include developing evidence-based domestic plans assessment, supporting financial diversification and sustainable development, and efficient management of natural resources.

  • Promoting job development, decent labor and redistributive poverty, and inequality and exclusion programs. Activities include encouraging decent job, removing obstacles to accessing employment possibilities, enhancing working circumstances, and expanding redistributive programs in particular in support of schemes of social security.

  • Mobilizing and expanding the funding to enable an inclusive and sustainable development transition. Activities shall include encouraging fiscal policies that are compliant with viable and inclusive development targets; encouraging the mobilization of national resources and the implementation of innovative environmental and clean power funding systems (UNDP 2019).

In designing macroeconomic policies, the notion of future development plays the main role. Monetary, fiscal, and recent strategies take into consideration estimates of output gaps – the distinction between perspective and observed output – to adjust their position to decrease possible macroeconomic imbalances, thus damping overall changes. Prospective development in theoretical and empirical literature has received comprehensive analyses, yet two variables influence the significance and utility of these ideas for economic policy. First, there is the capacity to reflect and synthesize economic imbalances. Second, there is the extent to which the estimates of the production gap and their strength toward new data remain uncertain (Alberola et al. 2013).

The notion of perspective development is based on many of the methodologies employed to achieve trend growth rates. In the context of manufacturing, the traditional Phillips curve is used to estimate standard future development connecting unemployment to inflation. Consequently, these estimates of future development only consider one specific imbalance: inflation. A reevaluation of sustainable growth levels is therefore needed to eliminate the imbalances that the economy entails in expansionary stages (Alberola et al. 2013).

Summary

As an economic term, growth refers percentage change in NI-National Income which the total value of all the final goods and services produced in a country for a given time period. Sustainable growth rate may indicate a rate of growth which macroeconomy or economy as a whole expect to experience without creating any volatility or imbalances.

Cross-References