I - ECONOMICS
1. ECONOMIC GROWTH ANDDEVELOPMENT
Economic Growth is an increase in a country's real level of national outputwhich can be caused by an increase in the quality of resources (by education etc.) & 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 concepti.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.
ECONOMIC GROWTH:Economic growth is an increased economic capacity to produce goods and services, compared from one period of time to another which is conventionally measured by increase in a country’s GDP (Gross Domestic Product) or GNP (Gross National Product) or per-capita Net Domestic Product (NDP). Per-capita NDP is the most appropriate measure of economic growth.
Economic growth comes in two forms
• An economy can either grow extensively by using more resources (i.e., physical, human or natural capital).
• Intensively by using the same amount of resources more efficiently (productively).
Factors influencing Economic Growth
1. Human resources –this is a major factor that is responsible for boosting the economic growth of a country. The rate of increase in the skills and capabilities of a workforce ultimately increases the economic growth of a country.
2. Infrastructure development-Improvements and increased investment in physical capital such as roadways, machinery, and factories will increase the efficiency of economic output by reducing the cost.
3. Planned utilization of natural resources –Proper use of available natural resources like mineral deposits helps boost the productivity of the economy.
4. Population growth –An increase in the growth of the population will result in the availability of more human resources which in turn will increase the output in terms of quantity. This is also an important factor that influences economic growth.
5. Advancement in technology –Improvement in technology will affect the economic growth of a country positively. The application of advanced technology will result in increased productivity of labor and economic growth will advance at a lower cost.
ECONOMIC DEVELOPMENT:It is referred to as the quantitative and qualitative changes in economy such as development ofhuman capital, critical infrastructure, regional competitiveness, environmental sustainability, social inclusion, health, safety, literacy etc.
- The term economic development can be explained as the process by which the economic well-being and quality of life of a nation, community, or particular region are improved according to predefined goals and objectives.
- Economic development is a combination of market productivity and the welfare values of the nation.
Factors Affecting Economic development
1. Infrastructural improvement –
Development in the infrastructure improves the quality of life of people. Therefore, an increase in the rate of infrastructural development will result in the economic development of a nation
2. Education –
Improvement in literacy and technical knowledge will result in a better understanding of the usage of different equipment. This will increase labor productivity and in turn, will result in the economic development of a nation.
3. Increase in the capital –
Increase in capital formation will result in more productive output in an economy and this will affect the economic development positively.
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.
| Economic growth | Economic development |
Meaning | It refers to an increase in the real outpot of goods and services in the country | It implies changes in income , savings and investment along with progressive changes in socio-economic structure of the the country (institutional and techological changes. ) |
Factor | It relates to gradual increase in one of the components of gross domestic product consumption, government,spending, net exports etc. | Growth of human capital indexes a decrease in inequality figures and structural changes that improve the general population quality of life. |
Measurement | Increase in real GDP | Indesxes:human development index gender-related index, human poverty index |
Concept | Narrower | Normative |
Effect | Quantitative change in the economy | Brings qualiitative and quantitative changes in the economy |
Relevance | Economic growth is a more relevant to measure for progress in developed countries but its widely used in all countries because growth is a necessary | Economic development is more relevant measure progress and quality of life in developing nations |
How to measure Development?
The logic behind development of Human Development Index (HDI) was to do away with the inherent weakness of use of GDP as measure of development.HDI is a part of the Human Development Report, which is an editorially independent annual publication ofUNDP (United Nation Development Program).
The report was first launched in 1990 by the Pakistani Economist Mahbub ul Haq and Indian Nobel laureateAmartya Sen.
Its objective was to place people at the centre of the development process in terms of economic debate, policy and advocacy. “People are the real wealth of a nation,” was the opening line of the first report in 1990.
This report ranks the countries on the basis of the Human Development Index.
Human development is defined as a process of enlarging people's choices and capabilities to enable them to lead a longer life, literate life and a life with a decent standard of living. – UNDP
India ranked 131 among 189 countries on the Human Development Index (HDI) for 2019, slipping two places from the previous year, according to the Human Development Report (HDR) 2020 released by the United Nations Development Program (UNDP).HDI emphasizes that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone.
The 2020 Report has introduced planetary pressures-adjusted Human Development Index, which adjusts the standard Human Development Index (HDI) by a country’s per capita carbon dioxide emissions and material footprint.
The other indices that form the part of the Report are:
- Inequality-adjusted Human Development Index (IHDI),
- Gender Development Index (GDI),
- Gender Inequality Index (GII) and
- Multidimensional Poverty Index (MPI).
Top Performers for 2019:
Norway topped the index, followed by Ireland and Switzerland. Hong Kong and Iceland complete the top five.
Miles to go
Through india improved its absolute value of the human development index (0.645 in 2019 from 0.642 the previous year), it dropped a place in overall ranking
COUNTRY | HDI RANK (2019) | CHANGE FROM 2018 |
Russsia | 52 | -3 |
Sri lanka | 72 | 1 |
Brazil | 84 | 0 |
China | 85 | 2 |
South africa | 114 | 1 |
India | 131 | -2 |
Bangladesh | 133 | 1 |
Nepal | 142 | 1 |
Pakistan | 154 | 0 |
1.Singapore was ranked 11, Saudi Arabia 40, and Malaysia was at 62 in the global index, representing the top bracket among the Asian countries with “very high human development".
2.Sri Lanka (72), Thailand (79), China (85) and Indonesia and Philippines (both 107), and Vietnam (117), among others, were “high human development" countries.
3. India, Bhutan, Bangladesh, Myanmar, Nepal, Cambodia, Kenya and Pakistan were ranked among countries with “medium human development" with ranks between 120 and 156.
India’s Performance :
- Overall Performance: HDI value for 2019 is 0.645, which puts the country in the medium human development category, positioning it at 131 out of 189 countries and territories.
- Between 1990 and 2019, India’s HDI value increased from 0.429 to 0.645, an increase of 50.3%.
- Long and Healthy Life: Life expectancy for Indian’s at birth was 69.7 years in 2019, slightly lower than the south Asian average of 69.9 years.
- Between 1990 and 2019, India’s life expectancy at birth increased by 11.8 years.
- Access to Knowledge: The expected years of schooling in India was 12.2 years, compared with 11.2 years in Bangladesh and 8.3 years in Pakistan.
- Between 1990 and 2019, mean years of schooling increased by 3.5 years, and expected years of schooling increased by 4.5 years.
- A Decent Standard of Living: In terms of Gross National Income (GNI) per capita, India at USD 6,681 fared better than some others in 2019, despite a fall over the previous year.
- India’s GNI per capita increased by about 273.9% between 1990 and 2019.
Planetary pressures-adjusted Human Development Index (PHDI):
The Report presents an adjustment to the HDI for planetary pressures. The PHDI retains the simplicity and clarity of the original HDI while accounting for some of the complex system-level dynamics discussed throughout the Report.
The adjustment corresponds to multiplying the HDI by an adjustment factor, creating the PHDI (diagram below). If a country puts no pressure on the planet, its PHDI and HDI would be equal, but the PHDI falls below the HDI as pressure rises (see animation). The adjustment factor is calculated as the arithmetic mean of indices measuring carbon dioxide emissions per capita, which speaks to reducing carbon dioxide emissions, and material footprint per capita, which relates to closing material cycles.