The effects of unemployment and inflation on output growth based on time series data of Bihar (India) over the period 1990–2019 has been examined in this paper. The physical capital expansion in terms of infrastructure development along with skill development to provide employment opportunities to the youth appears to be the major determinant of boosting the potential productivity of physical and human capital and affecting positively the economic growth. The results indicated that there are significant and certain benefits from the increased supply and improvement in the quality of physical capital which increases labor productivity as well as investment in human capital. Thus, it is recommended that Bihar makes large-scale investments in infrastructure and skill development and carry-on renewal at opportune moments to keep steady the positive trend of economic growth over the years. The investments may be in terms of mechanized technologies, supporting infrastructure and appropriating the knowledge relating to their management; and adopting new technologies and practices involving better innovation in agriculture, forestry, manufacturing, and relevant skill development to sustain the growth of value-added.
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