Economic Development

Economic Developmentwww.ghadoliyaseconomics-mahendra.blogspot.in

Meaning of Economic Progress-Economic Progress, Economic Growth and Economic Development are used interchangeably to mean almost same thing:Progress is a straight and upward movement. Progress is part of the development in some sectors. Progress deals with the current status in a very short period. Progress is concerned with the visible results in positive direction. It is a word used to denote betterment or improvement in any thing. The term progress is a general term with no specific meaning in economics and used to express the growth and development.

Economic Growth:

A term borrowed from life sciences growth in economics means economic growth.An increase in economic variables over a period of time is economic growth. Quantifiability is an important feature of growth. We can measure industrial production, road length, food production, educated persons, or per capita income of people to measure growth.Growth rates can be calculated annually in percentage across various sectors. It can be positive or negative. It is measured over a short period.

Meaning of Economic Development:During initial period economists used development only in terms of growth in national product over a long period. It was believed that growth once achieved will trickledown and will result in better quality of life.Economic Development is a process whereby an economys real national income increases over a long period of time.Three important things:Economic Development is a process,Real national income increasesLong period

Failure Trickle down TheoryLater it was realised that growth has not trickle down and has not resulted in the better quality of life as claimed by laissez-faire economists.The economists than defined economic development differently from economic growth to include the following:Nutritional level, health, sanitation, drinking water, vaccination, education and other such indicators which makes quality of life better. Thus we can say economic development is both quantitative as well as qualitative progress or growth.

Prof. Goulet Three Core Values of Development

Life Sustenance:The life-sustaining basic human needs include food, shelter, health and protection. When any one of these is absent or in critically short supply, a condition of absolute "underdevelopment" exists.Self-esteem:A second universal component of good life is self- esteem- a sense of worth and self-respect- of not being used as a tool by others for their own ends. Due to the significance attached to material values in developed nations, worthiness and esteem are now-a-days increasingly conferred only in countries that possess economic wealth and technological power- those that have developed.FreedomArthur Lewis stressed the relationship between economic growth and freedom from servitude when he concluded that "the advantage of economic growth is not that wealth increases happiness, but that it increases the range of human choiceGoulet, D. (1971) The Cruel Choice: A New Concept in the Theory of Development, New York, Athenaeum

Economic growth is a single dimensional quantitative concept which is concerned only with the rate of increase in national income. It ignores distribution of income and it ignores qualitative aspects of human life. Economic Development Economic development is broader in nature. It not only includes the quantitative change but also includes certain qualitative changes in the economy.Economic development means not just increase in the real per capita income but also reduction in economic-divide, poverty, illiteracy and unemployment. Thus, economic development includes both economic growth as well as social welfare.

Economic development focuses on inclusive growth Growth that includes all sectors of the economy and all sections of the society. The following discussion outlines the basic differences between Economic Growth and Development:Difference between Economic Growth Economic Development Single dimension Concept: Economic growth is merely a quantitative concept. It is concerned with rate of increase in national income. Double / Multi dimension Concept: Concept of economic development is both quantitative and qualitative in nature. It is concerned with welfare of people (a qualitative aspect) along with increase in per capita income (a quantitative concept).

Growth Ignores Distribution of Income: Distribution of income is ignored in case of economic growth. In spite of increase in income, number of poor people may rise if the distribution of income becomes further unequal. Development Considers Distribution of Income: In case of economic development, distribution of income is given due consideration. Reduction in inequality (of income distribution) is one of the principal targets of economic development. Inequality of income and wealth must be reduced.

Independent of Structural, Institutional and Technical Changes: Economic growth may occur independent of any structural, institutional and technical changes in the economy. Associated with socio-technological Change: Economic development is invariably associated with significant structural, institutional and technical changes in the economy. Development is a qualitative concept and relates to human development index (HDI) Gender Development Index (GDI) Human Poverty Index (HPI). Growth is quantitative concept.

Measurement of Economic Growth Economic growth is the rate of change at which an economy is growing year after year or the percentage change in the Gross Domestic Product (GDP) of a country year after year. The economic growth can be actual growth or potential growth. Potential growth is also sometimes called as targeted growth. Economic development is a normative concept which takes into account both qualitative and quantitative aspects. Economic development is an increase in overall living standards and quality of life of the people, on this basis, there are several parameters for measurement of the economic development as discussed below:

Rise in Real National Income Real national income at constant prices is conventionally a comprehensive measure of economic growth as well as development of an economy. It is estimated by dividing national income at current prices (also called monetary income) by the index of price level (showing the percentage change in price level over time). Generally, the increased real national income means higher economic development.Structural, Institutional and Technical Changes Development process must bring about structural, institutional and technical changes which stimulate the process of growth and social justice.

Real per capita income is often considered as a better indicator of economic development than the real national income.

Economic Welfare Economic development of a country can be viewed better in terms of economic welfare of the people. Economic welfare meanslower levels of poverty and inequalities, better health conditions,high literacy levels andbetter standard of life.

DEVELOPED, UNDERDEVELOPED AND THE DEVELOPING ECONOMIES:

DEVELOPING COUNTRIESUnderdeveloped, Third World, Poor ,Low income & developing countries are synonymous nomenclatures used interchangeably.

But the used of the word developing countries is preferred signifying that these countries are capable of making reasonable economic progress. There is a dynamism in this word.

A developing economy is essentially marching to progress and prosperity. The word underdeveloped or the poor or the low income countries is some what a static term and gives an inferior feeling.

Meaning of developing countries- Developing Countries are those countries which have low standard of living and the level of industrial production is well below their capacity which may be achieved with some financial and technical assistance.

CHARACTERISTICS OR SALIENT FEATURES OF UNDERDEVEOPED COUNTRIES: Low Income:For the current 2017 fiscal year,low-income economies are defined as those with a GNI per capita, calculated using theWorld Bank Atlas Method of $1,025 or less in 2015; lower middle-income economies are those with a GNI per capita between $1,026 and $4,035; upper middle-income economies are those with a GNI per capita between $4,036 and $12,475; high-income economies are those with a GNI per capita of $12,476 or more.

CHARACTERISTICS OR SALIENT FEATURES OF UNDERDEVEOPED COUNTRIES: Contd..

Low Levels of Living Since, about 3/4th of worlds population lives in underdeveloped countries which have less than one-fifth share in world income. It is obvious that a vast majority of people in these countries that must be living under conditions of poverty, malnutrition, disease, illiteracy, etc. even basic necessities of life are not available to them.

Income inequalities- Apart from wide gap between income levels in advanced and underdeveloped economies there also exists grave income inequalities between the rich and poor people within the underdeveloped countries.

CHARACTERISTICS OR SALIENT FEATURES OF UNDERDEVEOPED COUNTRIES: Contd..

Widespread Poverty Low Levels of Productivity High Rates of Population Growth Low Rates of Capital Formation Technological Backwardness Predominance of Agriculture in the Economy Export of Primary Products High levels of Unemployment and Underemployment Weak Infrastructure Low Social Indicators of Development Dependence and Vulnerability in International Relations Poor Quality of Human Capital

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