It is a narrower concept than economic development.
It is an increase in a country's real level of national
output 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
It is a process whereby an economy's real national
income as well as per capita income increases over
a long period of time.
Here, the process implies the impact of certain
forces which operate over a long period and embody
changes in dynamic elements.
It contains changes in resource supplies, in the rate
of capital formation, in demographic composition, in
technology, skills and efficiency, in institutional and
It also implies respective changes in the structure of
demand for goods, in the level and pattern of income
distribution, in size and composition of population, in
consumption habits and living standards, and in the
pattern of social relationships and religious dogmas,
ideas and institutions. In short, 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
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.
Development is, therefore, not only economic
growth, but growth plus change–social, cultural and
institutional as well as economic".
Development looks at a wider range of statistics than
just GDP per capita. Development is concerned with
how people are actually affected. It looks at their
actual living standards. Measures of economic
Development will look at:
Real income per head – GDP per capita
Levels of literacy and education standards
Levels of health care e.g. number of doctors per
Quality and availability of housing
Levels of environmental standards
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.
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:
(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
Difference between economic growth and
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.
Prof. Kindleberger has given the differences between growth
development as; "Growth may well imply not only more output
and also more inputs and more efficiency, i.e., an increase in
output per unit of input. Development goes beyond these to
imply changes in the structure of outputs and in the allocation
of inputs by sectors.
By analogy with human beings to stress growth involves
focusing on height and weight, while to emphasize
development, draws attention to the change in functional
capacity in physical coordination. For example, growth without
development-more and more steel in the Soviet Union or more
and more coffee in Brazil-leads nowhere. It is virtually
impossible to contemplate development without growth
because change in function requires a change in size. Until an
economy can produce a margin above its food, through
growth, it will be unable to allocate a portion of its resources to
other types of activity".
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
refers to an increase
in the real output of
goods and services
in the country.
Development relates to growth of
human capital indexes, a decrease
in inequality figures, and
structural changes that improve
the general population's quality of
Growth relates to a
gradual increase in
one of the components
of Gross Domestic
Basis Economic Development Economic Growth
gender- related index
(GDI), Human poverty
index (HPI), infant
mortality, literacy rate etc.
Increase in real GDP.
Shown by PPF.
Concept: Normative concept
Brings qualitative and
quantitative changes in the
changes in the economy
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
Economic Growth without Development
It is possible to have economic growth without development.
i.e. an increase in GDP, but most people don’t see any actual
improvements in living standards.
Economic growth may only benefit a small % of the
population. For example, if a country produces more oil, it will
see an increase in GDP. However, it is possible, that this oil is
only owned by one firm, and therefore, the average worker
doesn’t really benefit.
Corruption. A country may see higher GDP, but the benefits of
growth may be siphoned into the bank accounts of politicians
Environmental problems. Producing toxic chemicals will lead
to an increase in real GDP. However, without proper regulation
it can also lead to environmental and health problems. This is
an example of where growth leads to a decline in living
standards for many.
Production not consumed. If a state owned
industry increases output, this is reflected in an
increase in GDP. However, if the output is not used
by anyone then it causes no actual increase in living
Military Spending. A country may increase GDP
through spending more on military goods. However,
if this is at the expense of health care and education
it can lead to lower living standards.