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Economic Development and Economic Growth




Economic Development and Economic Growth
by Snigdha Chatterjee

We often used the word Economic Development and Economic Growth as a parameter of economic indicator of a country. Most of the cases we used the two words for the same meaning, but there are a number of differences between the two words, Economic development and Economic growth.

Here mainly we discuss the differences of the Economic development and Economic growth and also discuss the important terms of Economic development.

What do we mean by Economic growth?

Different economists have used the term economic growth to convey different meaning. In some cases the concept differ in essence, whereas the other only emphasis. Though economic growth is very much vital measurement to indicate the economic well-being of a nation but economic development is used as a vast sense than the economic growth. In simple sentence, it can be say that if the Gross domestic product (GDP) of a nation increases, than the per capita income of the population increased. So the consequences changes of national income, per capita increase in income, price stability, balance of payment equilibrium and low level of unemployment are the indicator of economic growth.

So in definition we can say that increase in GDP and continuously increase in national income, per capita income, going towards the price stability, balance of payment equilibrium and low level of unemployment indicate the economic growth of a nation

 Economic growth Indicator

National Income – National income will be increased due to the continuously increased of GDP and GNP (Gross national product). So if the rate of growth of national income increases than the citizen of the country get better benefit from the earlier and a stable investment is possible for the nation.

Per capita income- Due to the increase of national income per capita income of the population also increased. But if the population increased faster rate than the national income than the per capita income decreases and does not show as an indicator of economic growth.

Per capita consumption- Per capita consumption is related with economic growth but quietly different in developed and under developed countries. We know most of the under developed countries make not sure of their stable investment towards growth. In that case if the per capita income increases in an underdeveloped country, and people postpone their consumption with this extra income and save more than it will able to invest more .But the case is different for developed countries, if people save more in developed countries than demand will be low and investment low so consequently growth rate will be low.

So where in an under developed countries saving is an important factor for growth while in developed countries consumption is an important factor to generate demand.

 

What is Economic development?

Economic development is a broader aspect than economic growth. Through GDP we can measure economic growth, so it can be say that economic growth is a quantitative parameter. But in Economic development we consider the parameters like literacy, population growth, malnutrition, health facilities, housing facilities, law and order etc. So economic development is a qualitative parameter of a country rather than the quantitative.

In Developed countries like America European countries attain economic development through high rate of economic growth but underdeveloped countries like, India, Pakistan, Bangladesh does not able to attain economic development through economic growth. Because most of the resources remain unused and people of those countries have not such capabilities to utilize the resources .So if these countries attain a high level of economic growth its benefits derived by a small portion of population and income inequalities increases. So where as developed countries attain economic development through high level of economic growth, underdeveloped countries have to be concentrate on economic development with economic growth to eliminate inequalities.

Economic development Indicator

 Literacy level- the benefits of economic growth will not be spread all section of society if the population till illiterate and do not able to use the resources which they have, due to the lack of knowledge. So literacy is an important factor to utilize the resources optimally and to develop the human capacity to produce more within a time.

 Population growth rate- Growth rate of population is an important factor to reach the economic development or economic growth. If the population growth rate is higher than growth rate of GDP, there is no change of per capita income and the situation will remain the same. This case is often happened in under developed countries and the benefit of growth enjoys only a small portion of the society. So the income inequality increases. In developed countries population growth rate is minimal so the population enjoy the increase per capita income due to the increase of GDP.

Decrease the income inequality- In developed countries income inequalities decreases due to the increase of GDP and the nation attain economic growth due to the increase of GDP. So it can be say that in developed countries economic development achieved due to the higher Economic growth.

Increase the importance of other sector- In under developed countries land is the important factor of production and the main share of income comes from the agriculture sector. So there is huge chance to concentrate the income in fewer section of the society. AS the economy growing towards development and people able to use their knowledge, the share of income increases from industry and service sector.

So in Economic development and in Economic growth GDP is the important factor/term. But only increase in GDP indicates the Economic growth it does not indicate Economic development. Economic development indicates the sector where the share of income or GDP comes from. Larger the share comes from Industry or service sector indicate it is a Developed country. Larger the share comes from agriculture sector indicate it is a under developed countries.

You may go through

Land reform in India

Deed of settlement or patta

The importance of land in under developed countries







 

 

 

                                                                                                                                                                              

                                                                                                                                                                                                

  
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