Economic Growth and Economic Development

Economic Growth and Economic Development

Economic Growth and Economic Development

We used the word Economic Growth and Economic Development as a parameter of economic indicator of a country. We indicate economic growth through GDP of the country and  most of the cases we often used the two words for the same meaning by mistakes, but there are a number of differences between the two words, Economic growth and Economic development. Here mainly we discuss the definition, indicator and differences of the Economic growth and Economic development. Here also we discussed 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. 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 said that if the Gross domestic product (GDP) of a nation increases, the per ca pita income of the population increased. So the changes of national income, per ca-pita increase in income, price stability, balance of payment equilibrium and low level of unemployment are the indicator of economic growth of a nation.

So in definition we can said that increase in GDP and continuously increase in national income, per ca-pita 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 of a country will be increased due to the continuously increased of GDP and GNP (Gross national product) of that country. 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 ca-pita income- Due to the increase of national income per ca pita income of the population also increased. But if the population increased faster rate than the national income than the per ca pita income decreases and does not show as an indicator of economic growth.

Per ca pita consumption- per ca pita consumption is related with economic growth but its impact is 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 underdeveloped countries has limited number resources to invest. In that case if the per ca pita income increases in an underdeveloped country, people prefer to postpone their consumption with this extra income and save more. This accumulative saving flow back as an investment in underdeveloped countries .But the case is different for developed countries, if people save more in developed countries than demand will decreased. In this situation supply also decreased and investment low so consequently growth rate will decrease.

So where in an under developed countries saving is an important factor for growth, in developed countries consumption is an important factor to generate demand and gain economic growth.

 

Economic Growth and Economic Development

What is Economic development?

Economic development is a wide aspect than economic growth. We can measure economic growth through GDP, 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 in under developed countries 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. Whereas 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.

Definition of Economic Development- Economic development does not indicate only economic growth of a country but also indicate literacy rate, population growth rate, malnutrition, health and housing facilities, law and order of the country.

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 national income comes from the agriculture sector. So there is huge chance to concentrate the income in fewer section of the society. So, as the economy step up towards development, and people able to use their knowledge, the share of national income increases from secondary and tertiary  sector. It indicates that if the share of national income comes from secondary and tertiary sector more than the primary sector than it can be said that the economy growing towards economic development.

Conclusions

So in Economic development and in Economic growth, GDP is the most important factor/term. But only increase in GDP indicates the Economic growth it does not indicate Economic development. Economic development indicates the overall growth of a country moreover it indicate where the larger share of national income or GDP comes from. Large share of national income comes from secondary or tertiary sector of a country indicate it is a Developed country. Larger the share comes from primary sector of a country indicate it is an under developed countries.