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Subject - Economics: Economic Growth and Economic Development

Economic growth refers to the increase in a country's real national output or income, while economic development also considers qualitative factors like reductions in poverty and inequality. Modern economists view growth and development as distinct concepts, as growth can occur without accompanying development. Key differences are that economic development is multidimensional, considers income distribution, and is associated with structural changes, while economic growth is quantitative and ignores distribution. While India has experienced over 6% annual growth since 1992, its pace of reducing poverty and improving human development has been slower, showing a growth-development paradox and lack of inclusive growth.

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59 views3 pages

Subject - Economics: Economic Growth and Economic Development

Economic growth refers to the increase in a country's real national output or income, while economic development also considers qualitative factors like reductions in poverty and inequality. Modern economists view growth and development as distinct concepts, as growth can occur without accompanying development. Key differences are that economic development is multidimensional, considers income distribution, and is associated with structural changes, while economic growth is quantitative and ignores distribution. While India has experienced over 6% annual growth since 1992, its pace of reducing poverty and improving human development has been slower, showing a growth-development paradox and lack of inclusive growth.

Uploaded by

Priyanka
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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KOTHARI INSTITIUTE – 60 DAYS SMART COACHING & TRAINING PROGRAM

SUBJECT -- ECONOMICS

DAY - 1.

- Topic - Economic Growth and Economic Development

Economic Growth and Economic Development

Economic Growth and Economic Development are central to developed


as well as developing economies. Classical thinkers such as Adam Smith,
Karl Marx examined the problem of economic development as early as
18th century. However, the study of economic growth and development as
a specialized study started during the period of Great depression of 1929-
33 and World War-II.
Classical economists used the terms economic growth and economic
development as synonyms of each other. However, modern economists
such as J.A. Schumpeter, Ursula Hicks and Kindleberger have focused
on growth and development as two different concepts. They argued that
growth need not necessarily imply the occurrence of development.

Economic Growth
We have already discussed that Economic growth refers the long term
increase in real national output or real national income. Economic growth
is a single dimensional quantitative concept which is concerned only with
the rate of increase in national income. It ignores distribution of income
and it ignores qualitative aspects of human life.

Economic Development
Economic development is broader in nature. It not only includes the
quantitative change but also includes certain qualitative changes in the
economy. Economic development means not just increase in the real per
capita income but also reduction in economic-divide, poverty, illiteracy and
KOTHARI INSTITIUTE – 60 DAYS SMART COACHING & TRAINING PROGRAM

unemployment. Thus, economic development includes both economic


growth as well as social welfare. Economic development should focus on
inclusive growth – growth that includes all sectors of the economy and all
sections of the society.

The following table outlines the basic differences between Economic


Growth and Development:
Economic Growth Economic Development

Single dimension Concept: Double / Multi dimension Concept:


Economic growth is merely a Concept of economic development is
quantitative concept. It is both quantitative and qualitative in
concerned with rate of increase nature. It is concerned with welfare of
in national income. people (a qualitative aspect) along
with increase in per capita income (a
quantitative concept).

Ignores Distribution of Income: Considers Distribution of Income: In


Distribution of income is ignored case of economic development,
in case of economic growth. In distribution of income is given due
spite of increase in income, consideration. Reduction in inequality
number of poor people may rise (of income distribution) is one of the
if the distribution of income principal targets of economic
becomes further unequal. development. In equality of income
and wealth must be reduced.

Independent of Structural, Associated with socio-technological


Institutional and Technical Change: Economic development is
Changes: Economic growth invariably associated with significant
may occur independent of any structural, institutional and technical
structural, institutional and changes in the economy.
technical changes in the
economy.

Differences between Economic Growth and Development can also be


summarized in the below points:
KOTHARI INSTITIUTE – 60 DAYS SMART COACHING & TRAINING PROGRAM

• Economic growth is a narrow concept (It studies only increase in real per
capita income) while economic development is a broad concept (it studies
increase in real per capita income as well as economic welfare).
• Economic growth is only a quantitative concept whereas economic
development is both a quantitative as well as a qualitative concept.
• Economic growth ignores distribution of income. Economic development
studies distribution of income.
• Economic growth is the essential element of progress of developed
countries. Economic development is the essential element of the progress
of under developed countries.
• Economic development accounts for structural, institutional and technical
change in the economy while economic growth does not.
•
India Economy and the Growth Development Paradox
Economic growth is possible without development and like many others,
Indian economy also presents a growth development paradox. Since
1992, the average growth rate of India has been above 6% and it has
attracted global attention as a resilient economy that was able to keep
itself tamperproof against the effects of the subprime crisis and the global
financial slowdowns. Due to this, India is seen as emerging economic
powerhouse in the South Asia region. However, India is also home to a
large concentration of people living in debilitating poverty and social
deprivation. This is because the pace of poverty reduction and human
development has not kept pace with the economic growth. The key
reasons for this paradox are inequitable distribution of land and income,
lack of adequate funding on social development, adverse impacts of
liberalization on poor, lack of political will, lack of economic agenda
towards etc. and to a great extent the trade regime led by WTO. These all
have resulted in increasing gap between macroeconomic development
and social development and lack of inclusive growth overall in the Indian
economy. Thus, despite of more than two decades of economic growth,
India has yet to achieve economic development.

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