Growth & development

Economic Growth-

• The definition of economic growth refers to the gradual and sustained increase of a nation's actual national income and income per person over an extended period.

• Economic growth is a quantitative progress

Economic growth means Increase in-

• National Income and Per-Capita Income for long period of time

• Real and Nominal National Income

• Increase in Productive Capacity along with increase in income

Although there may be year-to-year fluctuations or short-term variations in the growth of national income, there has to be a continuous growth in national income in the long run for it to qualify as economic growth.

Economic development-

• It includes not only economic growth but also various other economic changes that improve the quality of life or standard of living of people in a country.

• The term "economic development" refers to the ongoing and consistent enhancement of the material welfare of a society.

• Economic development is a wider concept than economic growth.

• Economic development encompasses not only an increase in the national income but also various other changes that contribute to material progress.
• These changes include social, cultural, political, and economic changes.

• Economic development involves changes in the availability of resources, the rate of capital formation, the size and composition of the population, technology, skills, efficiency, and the institutional and organizational set-up.

• To achieve economic development, it is necessary to address all of these factors comprehensively.

Determinants of economic development & growth-

There are different Factors that impact the economic development of any country and these are as follows

1. Geographical factor-

• Countries having good Natural resources have high potential to have good economic growth and development.

2. Political factor-

• Stable government with innovative policies are favourable for growth and development of any country.

3. Human capital-

• For efficient development of any economy sufficient amount of labour and human capital is required.

4. Technological Progress- 

• The pace of economic growth is heavily influenced by technological advancements.

• Technological progress refers to the exploration of novel and more efficient techniques for production, or enhancing existing methods.

• The implementation of new and improved production methods is crucial for achieving economic progress.

• Researching and developing innovative techniques is a fundamental aspect of technological progress.

• The improvement of older production methods is also considered a form of technological progress.

• Advancements in technology play a vital role in boosting economic growth.

5. Entrepreneurship -

• The concept of entrepreneurship involves the skill of identifying fresh investment prospects, being ready to undertake risks, and investing in emerging business ventures.

• Successful entrepreneurship can lead to rapid progress and advancement in the economy.

6. Other factors-

• These include social factors like-family type, education, environment etc.

Difference Between Economic Growth and Development-

Sustainable development-

• The concept of sustainable development was described by the 1987 Bruntland Commission Report as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

• Sustainable development has four interconnected dimensions that work together - society, environment, culture, and economy. These dimensions cannot be viewed in isolation but must be considered as part of a whole.

Human development and Human Development Index-

• The UNDP defines human development as a process that expands people's choices.

• Essential choices for people at all levels of development include living a long and healthy life, acquiring better knowledge, and having access to resources for a decent standard of living.

• The Human Development Index (HDI) was developed by the UN to measure the level of human development in any country.

A. Human Development Index (HDI)

• Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development:

Old method (HDI before 2010)

• The HDI report in 2009 incorporated three factors: life expectancy at birth, education level, and standard of living.

• The first dimension, life expectancy at birth, served as an indicator of how healthy and long-lived the population is.

• The second dimension, knowledge and education, was measured by adult literacy rate (weighted at two-thirds) and the combined primary, secondary, and tertiary gross enrollment ratio (weighted at one-third).

• The third dimension, standard of living, was assessed by the natural logarithm of gross domestic product per capita at purchasing power parity.

New method (2010 HDI onwards)

• A long and healthy life- measured by life expectancy.

• Being knowledgeable -measured by expected years of schooling of children at school-entry age and mean years of schooling of the adult population.

• A decent standard of living-measured by Gross National Income per capita adjusted for the price level of the country.

The HDI is the geometric mean of normalized indices for each of the three dimensions.

• In 1990, the UNDP released its inaugural Human Development Report (HDR) that introduced the Human Development Index (HDI).

• The HDI was the primary effort to measure the developmental status of economies using a defined set of indicators.

• Mahbub ul Haq and Inge Kaul led the team that created the HDI.

• The HDI is based on the human development approach established by Mahbub ul Haq and grounded in Amartya Sen's study of human capabilities.

Countries are classified on the basis of points between 0 to 1

• High Human Development Countries: 0.800–1.000 points on the index.

• Medium Human Development Countries: 0.500–0.799 points on the index.

• Low Human Development Countries: 0.000–0.499 points on the index

B. Inequality-adjusted HDI

• The IHDI measures human development while taking into account inequality.

• It shows the level of human development when inequality is considered.

• The difference between the IHDI and HDI values is the loss caused by inequality in the distribution of the HDI within a country.

• The human development cost of inequality is the difference between the IHDI and HDI.

• The cost represents the overall loss to human development due to inequality.

C. Gender Development Index (GDI)

• The Gender Development Index (GDI) evaluates disparities between men and women in three dimensions of human development - health, knowledge, and living standards.

• The GDI employs the same indicators as the HDI to measure these dimensions.

• The HDI is computed separately for males and females, and the GDI is the ratio of the two scores.

• The GDI directly indicates gender inequality by displaying the female HDI as a proportion of the male HDI.

• The GDI is simply the ratio of female HDI value to male HDI value: GDI = HDI(f) /HDI(m) .

D. Gender Inequality Index (GII)

• The Gender Inequality Index (GII) is an index that measures inequality.

• It follows the same framework as the IHDI but focuses on the differences between men and women.

• The GII shows how gender inequality affects human development.

• A higher GII value indicates greater disparities between genders and more negative impacts on human development.

It measures gender inequalities in three important aspects of human development—

Reproductive health-

• It is measured by maternal mortality ratio and adolescent birth rates.

Empowerment-

• It is measured by proportion of parliamentary seats occupied by females and proportion of adult females and males aged 25 years and older with at least some secondary education.

Economic status-

• It is expressed as labour market participation and measured by labour force participation rate of female and male populations aged 15 years and older.

The Multidimensional Poverty Index (MPI)-

• The UNDP’s Human Development Report Office produces the Multidimensional Poverty Index (MPI).

• MPI evaluates lack of well-being across 10 indicators and three dimensions.

• MPI assesses poverty on an individual basis.

• An individual is classified as ‘MPI poor’ if they experience deprivation in at least one-third of the weighted indicators.

• The global MPI identifies people as 'MPI poor' based on the above criteria, making the index an objective measure of poverty.

The detailed division of this index is as follows-

Gross National Happiness (GNH)-

• Gross National Happiness (GNH) or Gross Domestic Happiness (GDH) is a guiding philosophy implemented by the government of Bhutan to measure the happiness and well-being of its citizens.

• A specialized index is utilized to assess the overall happiness and well-being of the population.

• The GNH or GDH philosophy emphasizes the importance of achieving a balance between material wealth and spiritual, social, and environmental well-being.

It has following parameters-

• Higher real per capita income.

• Good governance.

• Environmental protection.

• Cultural promotion.

World Happiness Report-

• The Sustainable Development Solutions Network (SDSN), an arm of the United Nations, publishes the World Happiness Report.

• The report features articles and rankings that evaluate the level of happiness in different countries.

• The evaluations are based on individuals' ratings of their own lives.

• The report also examines various factors that contribute to quality of life, which are correlated with happiness ratings.

Important one liner on Economic Growth and development.