What is economic growth and why does it matter?

If we were born in India in the 1950s or 1960s, our life would have been shaped almost entirely by scarcity. There would have been one doctor for thousands of people. Getting a telephone line would require us to wait years on a government list. And going to university or college would be a luxury. But our world today looks nothing like that — so what changed?

Is it that our government got more generous, or did we receive aid from wealthier countries? It’s neither of those two things, but simply that the Indian economy grew.

What that means is that the Indian economy achieved a sustained increase in the amount of goods (mobile phones, schools, hospitals) and services (internet, teachers, doctors) in these years. This is what economists call economic growth. When a country grows, its people collectively earn more, can afford more, and gain access to things that did not exist before. It is commonly measured through GDP, the total value of everything an economy produces in a year. When that number rises consistently, we say the economy is growing.

But we don’t care about economic growth for its own sake — but for what it does to people’s lives. Growth is the only force in human history that has reliably lifted large numbers of people out of poverty. Not charity, not foreign aid, and not some government subsidy. For most of human history, virtually everyone on earth lived in poverty: short lives, frequent famine, no reliable medicine. But in 18th-century Britain, the world found a systematic way to achieve sustained increases in productivity. The Industrial Revolution, as it’s known today, unleashed an era of economic growth that has transformed the world we live in.

The important thing to notice here is that growth was not engineered by a single person. It emerged from the collective action of millions of individuals. For instance, the Industrial Revolution was made possible not by a government program but by thousands of inventors, merchants, and tinkerers each pursuing their own interests. No one planned it. Britain simply provided the conditions — rule of law, secure property rights, a free internal market — and what followed transformed the world.