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 concept
Narrower 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.