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• Economic growth refers to an increase in the amount of goods and services produced in a country over a specific period of time. It has a quantitative dimension.
• In other words, economic growth means an increase in the real national income of the country.
• In the words of J. K. Mehta, “Economic growth indicates the quantitative increase in National Income”.
• According to Prof. Miller, “Economic growth is a process whereby, an economy’s real per capita income increases over a longer period of time”.
• According to Simon Kuznet, “Economic growth is a long term rise in capacity to supply increasing diverse economic goods to its population, this growing capacity being based on advanced technology and the institutional and ideological adjustments that it demands.”

Economic growth refers to an increase in the amount of goods and services produced in a country over a specific period of time. It has a quantitative dimension.

The important indicators used to measure the Economic Growth are as follows:

i. Increase in Gross Domestic Product (GDP):

• GDP is the monetary value of all the finished goods and services produced within a country’s borders, during a period of one year.
• Increase in Gross Domestic Product (GDP) is the main indicator of economic growth. 
• Economists define economic growth in terms of National Income aggregates. According to them, economic growth is a   process whereby, an economy’s GDP increases over a long period of time. 
• It means, economic growth implies increased output of goods  and services. Also, it is necessary to ensure that the increase in GDP must be steady over a long period of time.

ii. Increase in Per Capita Income (PCI):  

• Per Capita Income (PCI) refers to the annual average income of a person.
• An increase in PCI indicates an increase in the economic growth of an economy.
• It can be calculated as:

PCI = \(\cfrac{National\,Income}{Totel\,Population}\)

• A rise in PCI is possible when the growth of national income is more than the growth of population.
• As per the Economic Survey of 2010‐11, the PCI (in India) was Rs 40,745 in 2009‐10.

iii. Increase in Per Capita Consumption (PCC):

• Per Capita Consumption (PCC) basically indicates the extent of material well‐being and the standard of living of the people in an economy.
• Consumers intend to increase their standard of living by increasing their spending viz. by consuming more goods and services. Hence, an increase in PCC is considered as an indicator of economic growth.  
• PCC in simple terms refers to the quantum of money spent by an individual in a year on consumption of goods and services.
• Increased standard of living and welfare of the people in an economy depends upon the higher Per Capita Consumption (PCC).
• It can be calculated as:

PCC = \(\cfrac{Totel\, Private\, Consumption\, Expenditure}{Total\, Population}\)

• As per the Economic Survey of 2010‐11, the PCC of India was Rs 23,626 in 2009‐10.

Economic growth refers to an increase in the amount of goods and services produced in a country over a specific period of time. It has a quantitative dimension.

The features of Economic Growth are as follows:

i. No solution to Economic Problems: 

• Economic growth does not provide any solution to the economic problems faced such as poverty, inequality, unemployment etc.
• It solely concentrates on the increase in production of goods and services.  

ii. Continuous Process: 

• Economic growth refers to the continuous increase in the production of goods and services by making the optimum usage of available resources.  
• However, a temporary and sudden increase in the Gross National Product (GNP) during the boom period cannot be regarded as increase in economic growth.

iii. Increase in Per Capita Real Income:  

• Real National Income refers to the nation’s total output of final goods and services in physical or real terms rather than in monetary terms. 
• If the rate of growth of population is lower than the rate of increase in real income, then there is an increase in the Per Capita Real Income. This is considered as a feature of economic growth.

iv. Quantitative Concept: 

• Economic growth refers to an increase in the amount of goods and services produced in a country over a specific period of time.
• The concept pulls attention towards the aspect of size or quantity or number. 
• It takes into consideration various quantitative aspects such as increase in National and Per Capita Income whereas it fails to consider nature of wants, quality of goods, taste of the consumers and so on. Thus, Economic Growth is termed as a quantitative concept.

v. Long Term Process: 

• Economic Growth is a long term process.  
• It is measured in terms of increase in National Income which takes place over a longer period of time.

vi. Lack of Structural Changes:

• Economic growth does not cause any structural changes in the economy.
• Structural change refers to the long term shift in the nation’s structure.
• For e.g. An agrarian economy transforming into an industrialized economy. The economy, in this stage, mainly depends upon the growth in the primary sector i.e. agriculture.

No, I do not agree with the above statement. [PCC is a superior indicator than PCI]

Reasons:

• PCI refers to the annual average income of a person, whereas, PCC indicates the extent of material well‐being and the standard of living of the people in an economy.
• PCI is an indicator of economic productivity, whereas, PCC is an indicator of standard of living of the people. 
• PCI is derived by dividing the National Income by the Total Population of an economy, whereas, PCC is derived by dividing the Total Private Consumption Expenditure of a nation by its Total Population.
• However, PCC is considered as more realistic and practical indicator when compared to PCI as it reflects the standard of living of people.
• PCC also reflects the level of poverty and income inequality in an economy.

Thus, Per Capita Consumption (PCC) is a superior indicator than Per Capita Income (PCI).

Per capita income as a development index has certain limitations:

• Per capita income is an average income. For example, assume that the per capita income of a country is Rs. 40,000. This does not mean that each individual of the country receives an income.
• Of Rs. 40,000. It includes the population earning crores of rupees as well as those with very low income. So, this is merely a numerical calculation.
• While calculating economic development on the basis of per capita income, It cannot be claimed that improvement in the quality of living has been attained if the rich-poor disparity persists.
• Per capita income as a development index ignores factors like education, availability of nutritious food and health care facilities that improve the quality of living.
• Concerned only with economic growth, per-capita income as a development index does not take into account social welfare and the equitable distribution of income.

Increase in the standard of living with economic growth is called economic development.

Economic growth:

a) National income increased 

b) Production of what increased to 150 crore tones. 

c) National Highways were developed into four lanes. 

Economic development: 

d) Skill training was provided to the laborers. 

e) Implemented modem facilities in the health sector 

f) Basic facilities of education institutions were improved

As a result of economic growth, several changes take place in an economy. Such changes include.

• Increase in industrial production. 
• Increase in agricultural production. 
• Growth in the service sector. 
• Increase in purchasing power.

Economic development is a planned growth. It implies economic growth along with progressive changes in certain areas which determine the well being of the people. Thus, it has a qualitative dimension rather than a quantitative one.

The important indicators of Economic Development are as follows:

i. Structural Transformation:  

• Structural transformation such as changes in attitudes, ideologies, institutions etc. can be considered as an important indicator of economic development.  
• Such changes further lead to modernization and urbanization in the country.

ii. Per Capita Consumption (PCC):  

• PCC basically indicates the extent of material well‐being and the standard of living of the people in an economy.
• Consumers intend to increase their standard of living by increasing their spending viz. by consuming more goods and services. Hence, an increase in PCC is considered as an indicator of economic development.
• PCC in simple terms refers to the quantum of money spent by an individual in a year on consumption of goods and services.
• Increased standard of living and welfare of the people in an economy depends upon the higher Per Capita Consumption (PCC).
• It can be calculated as:

PCC = \(\cfrac{Totel\, Private\, Consumption\, Expenditure}{Totel\, Population}\)

iii. Qualitative Entrepreneurship:

• Qualitative entrepreneurship is one of the important indicators of economic development. 
• Entrepreneur is a person who runs an enterprise.
• Talented and efficient entrepreneurs are required for the economic development as they keep the wheels of the economy moving. 
• The history of developed countries indicates that the economic development of an economy is mainly due to the creative talents of the entrepreneurs.  
• Entrepreneur is the person with some special qualities such as ability to innovate, hard work, vision, self confidence, positive attitude, etc.  

iv. Environmental Balance:  

• Environment consists of climate, soil, water etc. on which a nation’s agriculture and industrial sector depends.  
• The process of economic development causes environmental imbalance. This happens due to pollution, over‐exploitation of natural resources, etc. Such practices must be avoided for the sake of future generations. 
• It is the responsibility of the nation to achieve sustainable economic development with the help of eco‐friendly practices and environmental conservation.

v. Per Capita Income (PCI): 

• Per Capita Income (PCI) is another important indicator of economic development. It is defined as ‘Average income of a nation’.
• An increase in PCI indicates an increase in economic development. In other words, it indicates economic welfare of the country.
• Some economists prefer Real Per Capita Income to Real National Income. This is because; economic development will have no meaning if it fails to increase the standard of living of the common people.
• According to the Economists, “Economic development is a process whereby, an economy’s real per capita income increases over a long period of time”.
• A rise in the PCI is possible when the growth of national income is more than the growth of population.
• It can be calculated as:

PCI = \(\cfrac{Totel\, National\, Income}{Totel\, Population}\)

vi. Productivity Per Hectare of Land:  

• Land productivity is an important indicator of economic development. 
• Higher the productivity of land, higher is the economic development.
• Land productivity is the average yield (in kilograms) of a crop per hectare of land.

  ‐  It can be calculated as: 

Productivity per hectare = \(\cfrac{Totel\, Production\, of\, Crops\, (in\, kgs)}{Totel\, Land\, Area\, Under\, the\, crop}\)

• The agricultural productivity mainly depends upon the soil, climate, rainfall, chemical fertilizers, seeds, equipments etc. 

vii. Physical Quality of Life Index (PQLI):

• Overall well being and quality of life of the people are the important factors on which the development of the economy largely depends.
• PQLI is one such indicator which refers to the overall well being of the people that depend upon life expectancy, infant mortality and literacy.

viii. Capital Formation:  

• Capital formation is another indicator of economic development that depends upon the rate of capital formation which further depends upon savings.
• It means converting savings into physical productive assets such as transport facilities, electricity generation, dams, modern technology etc. 
• Increase in capital formation leads to increase in economic development of the nation.

ix. Industrial Progress:

• The Industrial progress plays a significant role in the economic development of a nation.
• During the period of Second Five Year Plan, Indian industries got an opportunity to expand. This further helped in increasing the national output and per capita income.
• As and when the industries started to expand, the share of industrial sector in the GDP started increasing, leading to the rise in employment, output and income in other sectors also.
• Apart from this, modernization, urbanization, education, technical knowledge etc. is also related to the process of industrialization.

x. Human Development Index (HDI):

• HDI refers to the process of enlarging people’s choices and well being.
• It is measured in terms of the expectancy of life, education achievement and GDP. Per Capita HDI is the simple average of these three factors.
• It is the index used by the United Nations to measure the progress of a country.
• HDI is an important indicator of economic development. It involves availability of better health and educational facilities which further helps to improve the overall efficiency and productivity of the people of the economy.  
• Here, an upward movement in HDI indicates improvement in human development.

xi. Gross National Income or GNP:  

• According to Dr. Kuznet, real GNP is a useful indicator of economic development. 
• It refers to the total market value of all final goods and services produced in an economy during a particular year including Net Income from abroad.

Economic development is a planned growth. It implies economic growth along with progressive changes in certain areas which determine the material well being of the people. Thus, it has a qualitative dimension rather than a quantitative one.

The features of Economic Development are as follows:

i. Sectoral Transformation:

• Economic development occurs due to shift of population from primary sector to the secondary and finally to service sector.
• Such a change indicates development of skills, discipline and modernity etc.

ii. Long Term Process:  

• Economic development implies that the increase in real national income should be sustained over a period of time. Thus, it is a long term process.

iii. Increase in Real National Income:

• Economic development considers an increase in the ‘real national income’ rather than increase in ‘nominal (monetary) national income’. 
• Here, the real national income refers to the total output of goods and services, whereas, nominal national income refers to real national income multiplied by the Price Level.

iv. Qualitative Concept:

• Economic development can be explained in qualitative terms such as changes in wants, goods, institutions etc.
• It possesses a qualitative dimension.

v. Role of Economic and Non‐economic Factors: 

• Both, economic as well as non‐economic factors play an important role in the development of the country
• Economic factors include foreign trade, supply of capital, sound infrastructure, talented entrepreneurs etc.; whereas, non‐economic factors include political freedom, stable government, efficient social structure and outlook of people etc.

vi. Structural Transformation:

• Economic development helps in changing the structure of the economy from agrarian to industrial economy and further into a large service sector. 
• Due to this, the share of agriculture declines and that of industrial and service sector increases in Gross Domestic Product (GDP).  
• In other words, higher the share of service sector in GDP, higher is the economic development of the nation.

vii. Public Participation:

• Economic development is possible only when citizens of the country participate and   co‐operate with each other in the process of development.

• The concept of economic development is a wider concept than economic growth. 
• It implies economic growth along with progressive changes in certain areas which determine the well being of the people. Thus, it has a qualitative dimension rather than a quantitative one.
• There are two main approaches to the concept of Economic Development viz. Traditional approach and Modern approach.  

Traditional Approach:

• Traditional approach is one of the main approaches to the concept of economic development.
• According to this approach, economic development implies sustained annual increase in Gross Domestic Product (GDP) at 5% to 7% or more along with changes in the structure of employment and production.
• It indicates a fall in the share of primary sector and an increase in the share of manufacturing as well as tertiary sector
• However, under such an approach, the objectives relating to eradication of poverty, reduction of inequalities and unemployment failed to receive the required importance.

Modern Approach:

Modern economists such as Charles P. Kindleberger and Bruce Herrick have given the concept of economic development. 

According to their approach, economic development is generally defined to include the following:

• Improvement in the standard of living of people or material welfare, especially for low income groups.
• Reduction of unemployment, infant mortality rate etc.  
• Eradication of mass poverty, illiteracy, disease etc.
• Changes in the share of various sectors in National Income i.e. dominance of industry rather than agriculture.
• Functioning of economy for welfare of the people.

Definitions of Economic Development

• In the words of Meier and Baldwin, “Economic development is a process whereby an economy’s real national income increases over a long period of time”.
• According to Michael Todoro, “Development must be conceived of as a multi‐dimensional process involving changes in structure, attitudes, institutions as well as the acceleration of economic growth, the reduction of inequality and eradication of absolute poverty”.
• According to Milton Friedman, “Economic development is an innovative process that leads to the structural transformation of social system”.

1. i. natural

2. iv. a deliberate

3. ii. quantitative

4. ii. long term

5. iii. boom

6. ii. national income

7. i. Real National Income

Economic Growth means an increase in the total output of a country compared to that of the previous year.

Establishment of new hospitals 

↓ 

More people receive hospital facilities 

↓ 

Improvement in health condition of people 

↓ 

Better health leads to better standard of living

According to, United Nations Development Programme (UNDP). “Human development is the expansion process of opportunities that help the people to improve their human resource”

There are various factors that help in attaining human development. Let us see a few:

• Improved educational facilities. 
• Better healthcare facilities. 
• Increased training.

Better educational facilities 

↓ 

Increase in the number of people receiving education 

↓ 

Increase in employment opportunities to educated people 

↓

Increase in income and purchasing power 

↓ 

Better standard of living

• Economic inequality 
• Inequality in income 
• Regional inequality

• Environmental goals 
• Economic goals 
• Social goals

• Poverty 
• Unemployment 
• Illiteracy 
• Malnutrition 
• Economic inequality,

• Economic inequality 
• Inequality of Income 
• Regional inequality

PQLI : Morris D. Morris 

HDI: UNDP 

Happiness Index : Bhutan