3 ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT

1 27 ECONOMIC GROWTH and ECONOMIC DevelopmentECONOMICSMODULE - 2 Current challenges beforethe Indian EconomyNotes3 ECONOMIC GROWTH ANDECONOMIC DEVELOPMENTE conomics is all about making smart choices to cope with scarcity. The mostfundamental measurement used to evaluate the success in allocating the scarceresources is ECONOMIC GROWTH . Individuals monitor their income and the changingvalue of their assets. Businesses track their profits and their market monitor a variety of statistics to measure ECONOMIC GROWTH such asnational income , productivity etc. Moving beyond GROWTH and productivity,some economists argue that any assessment of the nation s economy must alsoinclude measurements of distribution, equity, per-capita income etc.

2 Further, thecountry should also focus on other needs of a society, like environmental justiceor cultural preservation to sustain the ECONOMIC GROWTH process and allows anoverall human DEVELOPMENT in the economy through creation of more opportunitiesin the sectors of education, healthcare, employment and the conservation of completing this lesson, you will be able to:zdefine the meaning of ECONOMIC GROWTH and ECONOMIC DEVELOPMENT , andtheir differences;zexplain the concept of Sustainable DEVELOPMENT and Human DEVELOPMENT ;zlist out the factors affecting ECONOMIC GROWTH ; andzdescribe the broad Features of the Underdeveloped - 2 ECONOMIC GROWTH and ECONOMIC DevelopmentCurrent challenges beforethe Indian Economy ECONOMIC GROWTHThe term ECONOMIC GROWTH is defined as the process whereby the country s realnational and per capita income increases over a long period of definition of ECONOMIC GROWTH consists of the following features of economicgrowth:zEconomic GROWTH implies a process of increase in National income andPer-Capita income .

3 The increase in Per-Capita income is the better measureof ECONOMIC GROWTH since it reflects increase in the improvement of livingstandards of GROWTH is measured by increase in real National income andnot just the increase in money income or the nominal national income . Inother words the increase should be in terms of increase of output of goods andservices, and not due to a mere increase in the market prices of existing in Real income should be Over a Long Period: The increase of realnational income and per-capita income should be sustained over a long periodof time. The short-run seasonal or temporary increases in income should notbe confused with ECONOMIC in income should be based on Increase in Productive Capacity:Increase in income can be sustained only when this increase results from somedurable increase in productive capacity of the economy like modernization oruse of new technology in production, strengthening of infrastructure liketransport network, improved electricity generation ECONOMIC DEVELOPMENTE conomic DEVELOPMENT is defined as a sustained improvement in material wellbeing of society.

4 ECONOMIC DEVELOPMENT is a wider concept than economicgrowth. Apart from GROWTH of national income , it includes changes social,cultural, political as well as ECONOMIC which contribute to material progress. Itcontains changes in resource supplies, in the rate of capital formation, in size andcomposition of population, in technology, skills and efficiency, in institutional andorganizational set-up. These changes fulfill the wider objectives of ensuring moreequitable income distribution, greater employment and poverty alleviation. Inshort, ECONOMIC DEVELOPMENT is a process consisting of a long chain of inter-related changes in fundamental factors of supply and in the structure of demand,leading to a rise in the net national product of a country in the long run.

5 29 ECONOMIC GROWTH and ECONOMIC DevelopmentECONOMICSMODULE - 2 Current challenges beforethe Indian EconomyNotesThe ECONOMIC GROWTH is a narrow term. It involves increase in output inquantitative terms but ECONOMIC DEVELOPMENT includes changes in qualitativeterms such as social attitudes and customs along with quantitative GROWTH ofoutput or national DEVELOPMENT without GROWTH is almost inconceivable. The comparisonbetween the two concepts is given in the following COMPARISON CHART: ECONOMIC GROWTH DEVELOPMENT ECONOMIC GROWTH ECONOMIC DevelopmentMeaningFactors:Measurement:Ef fect:Relevance: ECONOMIC GROWTH refersto an increase in the realoutput of goods andservices in the relates to agradual increase in one ofthe components of GrossDomestic Product.

6 Consumption, governmentspending, investment, GROWTH ismeasured by quantitativefactors such as increase inreal GDP or per capitaincomeEconomic growthbrings quantitative changesin the GROWTH reflectsthe GROWTH of national orper capita DEVELOPMENT implieschanges in income , savings andinvestment along withprogressive changes in socio- ECONOMIC structure of country(institutional and technologicalchanges). DEVELOPMENT relates to growthof human capital, decrease ininequality figures, and structuralchanges that improve the qualityof life of the qualitative measures such asHDI (Human DevelopmentIndex), gender- related index,Human poverty index (HPI),infant mortality, literacy rate used to measure DEVELOPMENT leads toqualitative as well as quantitativechanges in the DEVELOPMENT reflectsprogress in the quality of life in - 2 ECONOMIC GROWTH and ECONOMIC DevelopmentCurrent challenges beforethe Indian Economy 30 NotesINTEXT QUESTION ECONOMIC DEVELOPMENT is a wider concept than ECONOMIC GROWTH .

7 Doyou agree with the statement? SUSTAINABLE DEVELOPMENTS ustainable DEVELOPMENT is DEVELOPMENT that meets the needs of the presentwithout compromising the ability of future generations to meet their own DEVELOPMENT includes the protection of future ECONOMIC GROWTH andfuture DEVELOPMENT . In other words, it means a better quality of life for everyone,now and for generations to come. Sustainable DEVELOPMENT includes the protectionof future ECONOMIC GROWTH and future DEVELOPMENT . GROWTH is essential, butsustainable DEVELOPMENT requires it to be different. It must become more concernedabout the physical environment not only to present generation, but to the futuregeneration also.

8 It means that the current consumption cannot be financed for longby increasing ECONOMIC debt and ecological imbalance which future generationwill pay. Sustainable DEVELOPMENT constantly seeks to achieve social and economicprogress in ways that will not exhaust the earth s finite natural DEVELOPMENT is a process of DEVELOPMENT in which ECONOMIC and otherpolicies are designed to bring about DEVELOPMENT which is economically, sociallyand ecologically sustainable. The concept thus is pro-people, pro-job and pro-nature. It gives highest priority to poverty reduction, productive employment,social integration and environmental sustainable DEVELOPMENT thus requireszPreservation of Ecological Resources and greater use of renewable to the use of environmentally-safe technologies for developmentpurposes focus on reduction of all kinds of pollution involved in theeconomic and implementation of policy framework for people-security andhuman justice, including ecological and ECONOMIC HUMAN DEVELOPMENTA ccording to the United Nation s DEVELOPMENT Programme (UNDP), humandevelopment may be defined as a process of enlarging people s choices.

9 At alllevels of DEVELOPMENT , the three essential choices for people include to live a longand healthy life, to acquire better knowledge and to have access to resourcesneeded for a decent standard of living. If these essential choices are not available,many other opportunities to improve the quality of life will remain DEVELOPMENT has two dimensions: acquiring human capabilities and the use 31 ECONOMIC GROWTH and ECONOMIC DevelopmentECONOMICSMODULE - 2 Current challenges beforethe Indian EconomyNotesof these acquired capabilities for productive, leisure and other purposes. Thebenefits of human DEVELOPMENT go far beyond the expansion of income and wealthaccumulation because people constitute the very essence of human DEVELOPMENT is about much more than ECONOMIC GROWTH .

10 The economicgrowth focuses on the improvement of one option income or product whilehuman DEVELOPMENT focus on enlarging all human options including education,health, clean environment and material well being. Thus, the options available forimproving people s lives are influenced by the quality of ECONOMIC GROWTH in itswider sense, and the impact is by no means confined to quantitative aspects of suchgrowth. In other words, ECONOMIC GROWTH needs to be seen as a means, albeit animportant one, and not the ultimate goal, of DEVELOPMENT . income makes animportant contribution to human well-being, broadly conceived, if its benefits aretranslated into more fulfilled human lives.