Economic Development & Economic Growth

Economic Growth is a narrower concept than economic development. It is an increase in a country's real level of national output which can be caused by an increase in the quality of resources (by education etc.), increase in the quantity of resources & improvements in technology or in another way an increase in the value of goods and services produced by every sector of the economy. Economic Growth can be measured by an increase in a country's GDP(gross domestic product).

Economic development is a normative concept i.e. it applies in the context of people's sense of morality (right and wrong, good and bad). The definition of economic development given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice.

The Human Development Index (commonly abbreviated HDI) is a summary of human development around the world and implies whether a country is developed, still developing, or underdeveloped based on factors such as life expectancy, education, literacy, gross domestic product per capita. The results of the HDI are published in the Human Development Report, which is commissioned by the United Nations Development Program(UNDP) and is written by scholars, those who study world development and members of the Human Development Report Office of the UNDP.

According to the UNDP, human development is “about creating an environment in which people can develop their full potential and lead productive, creative lives in accord with their needs and interests. People are the real wealth of nations. Development is thus about expanding the choices people have to lead lives that they value.”

In the year 1990 the United Nations Development Programme in its first Human Development Report introduced the concept of Human Development Index.

It is the cumulative measurement of: (a) Longevity (b) Knowledge (c) Decent Standard of Living.

(a) Longevity: It shows the life expectancy. It is a choice to live long and healthy life.

(b) Knowledge: It is a choice to acquire literacy, education, information, etc. It is measured by the literate percentage in ratio with the total population. The literacy rate may be compared in the primary, secondary and tertiary levels.

(c) Decent standard of life: It is a joy to enjoy a quality and standard life. It depends upon the purchasing power of the people and the per capita income of the people etc.

The rank of a country is determined by the overall developments in these three basic dimensions of human developments. ADI ranks countries, in relation to each other to tell them how for a country has travelled and how for yet it has to travel in the part of Human Development

The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affect productivity and could lead to Economic Growth. It also leads to the creation of more opportunities in the sectors of education, healthcare, employment and the conservation of the environment. It implies an increase in the per capita income of every citizen.

Difference between economic growth and economic development. Economic Growth does not take into account

the size of the informal economy. The informal economy is also known as the black economy which is unrecorded economic activity. Development alleviates people from low standards of living into proper employment with suitable shelter. Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion & disease.

Development however is concerned with sustainability which means meeting the needs of the present without compromising future needs. These environmental effects are becoming more of a problem for Governments now that the pressure has increased on them due to Global warming.

Basis Economic Development Economic Growth

Economic development implies changes in income, savings and investment along with progressive changes in socio-economic structure of country (institutional and technological changes).

Economic growth refers to an increase in the real output of goods and services in the country.

Factors:

Development relates to growth of human capital indexes, a decrease in inequality figures, and structural changes that improve the general population's quality of life.

Growth relates to a gradual increase in one of the components of Gross Domestic Product: consumption, government spending, investment, net exports.

Basis Economic Development

Economic Growth

Measurement:

Qualitative.HDI (Human Development Index), gender- related index (GDI), Human poverty index (HPI), infant mortality, literacy rate etc.

Quantitative. Increase in real GDP. Shown by PPF.

Concept: Normative conceptNarrower concept than economic development

Basis Economic Development

Economic Growth

Effect:Brings qualitative and quantitative changes in the economy

Brings quantitative changes in the economy

Relevance:

Economic development is more relevant to measure progress and quality of life in developing nations.

Economic growth is a more relevant metric for progress in developed countries. But it's widely used in all countries because growth is a necessary condition for development.