Question

What is the significance of credit in development of country on?

Answer 1

Credit is the most important part of the economy. Ray Dalio, founder of the investment firm Bridgewater Associates, describes it as a transaction between a lender and a borrower, in which the borrower promises to pay back the money in the future along with interest.

Credit leads to an increase in spending, thus increasing income levels in the economy. This in turn leads to higher GDP (gross domestic product) and thereby faster productivity growth. If credit is used to purchase productive resources, it helps in economic growth and adds to income. Credit further leads to the creation of debt cycles.