Definition

Economic Growth
A positive change in the level of production of goods and services by a country over a
certain period of time. Nominal growth is defined as economic growth including
inflation, while real growth is nominal growth minus inflation. Economic growth is
usually brought about by technological innovation and positive external forces.

Economic growth is a term used to indicate the increase of per capita gross domestic product
(GDP) or other measure of aggregate income. It is often measured as the rate of change in GDP.
Economic growth refers only to the quantity of goods and services produced.
Economic growth can be either positive or negative. Negative growth can be referred to by
saying that the economy is shrinking. Negative growth is associated with economic recession and
economic depression.
In order to compare per capita income across multiple countries, the statistics may be quoted in a
single currency, based on either prevailing exchange rates or purchasing power parity. To
compensate for changes in the value of money (inflation or deflation) the GDP or GNP is usually
given in "real" or inflation adjusted, terms rather than the actual money figure compiled in a
given year, which is called the nominal or current figure.
Economists draw a distinction between short-term economic stabilization and long-term
economic growth. The topic of economic growth is primarily concerned with the long run. The
short-run variation of economic growth is termed the business cycle.
The long-run path of economic growth is one of the central questions of economics; despite
some problems of measurement, an increase in GDP of a country is generally taken as an
increase in the standard of living of its inhabitants. Over long periods of time, even small rates of
annual growth can have large effects through compounding (see exponential growth). A growth
rate of 2.5% per annum will lead to a doubling of GDP within 29 years, whilst a growth rate of
8% per annum (experienced by some Four Asian Tigers) will lead to a doubling of GDP within
10 years. This exponential characteristic can exacerbate differences across nations
Economic Development

Economic development is the development of economic wealth of countries or regions for the well-being of their
inhabitants. This is the short definition of Economic Development.
Economic Growth & development are two different terms used in economics.Generally speaking economic
development refers to the problems of underdeveloped countries and economic growth to those of developed
countries.
By Economic Growth we simply mean increase in per capita income or increase in GNP. In recent literature, the term
economic growth refers to sustained increase in a country's output of goods and services, or more precisely product
per capita. Output is generally measured in terms of GNP.
The term economic development is far more comprehensive. It implies progressive changes in the socio-economic
structure of a country. Viewed in this way economic development Involves a steady decline in agricultural shares in
GNP and continuous increase in shares of industries, trade banking construction and services. Further whereas
economic growth merely refers to rise in output; development implies change in technological and institutional
organization of production as well as in distributive pattern of income.
Hence, compared to the objective of development, economic growth is easy realize. By a larger mobilization of
resources and raising their productivity, output level can be raised. The process of development is far more
extensive. Apart from a rise in output, it involves changes in composition of output, shift in the allocation of productive
resources, and elimination or reduction of poverty, inequalities and unemployment.
In the words of Amartya Sen "Development requires the removal of major sources of unfreedom poverty as well as
tyranny, poor economic opportunities as well as systematic social deprivation neglect of public facilities as well as
intolerance or over activity of repressive states."
Economic development is not possible without growth but growth is possible without development because growth is
just increase in GNP It does not have any other parameters to it. Development can be conceived as Multi-
Dimensional process or phenomena. If there is increase in GNP more than the increase in per capita Income then we
can say that Development is possible. When given conditions of population improves then we can say that this is also
an indicator of economic Development.

ECONOMIC DEVELOPMENT CONCEPTS

Traditionally economists have made little if any distinction between economic growth and economic development
using the terms almost synonymously.

As a concept, Economic development can be seen as a complex multi-dimensional concept involving improvements
in human well-being, however defined Critics point out that GDP is a narrow measure of economic welfare that does
not take account of important non-economic aspects eg more leisure time, access to health & education,
environment, freedom or social justice. Economic growth is a necessary but insufficient condition for economic
development.
Professor Dudley Seers argues development is about outcomes ie development occurs with the reduction and
elimination of poverty, inequality and unemployment within a growing economy.

Professor Michael Todaro sees three objectives of development:

The UN has developed a widely accepted set of indices to measure development against a mix of composite
indicators:
UN's Human Development Index (HDI) measures a country's average achievements in three basic dimensions of
human development: life expectancy, educational attainment and adjusted real income ($PPP per person).
UN's Human Poverty Index (HPI) measure deprivation using % of people expected to die before age 40, % of
illiterate adults, % of people without access to health services and safe water and the % of underweight children
under five.
Development economics emerged as a branch of economics because economists after World War II become
concerned about the low standard of living in so many countries of Latin America, Africa, and Asia. There are,
however, important reservations in making development economics as branch of economics as opposed to the
ultimate objective of the study of economics. The first approaches to development economics assumed that the
economies of the less developed countries (LDCs) were so different from the developed countries that basic
economics could not explain the behavior of LDC economies. Such approaches produced some interesting and even
elegant economic models, but these models failed to explain the patterns of no growth, slow growth, or growth and
retrogression found in the LDCs.

Slowly the field swung back towards more acceptance that opportunity cost, supply and demand, and so on apply to
the LDCs also. This cleared the ground for better approaches. Traditional economics, however, still couldn't reconcile
the weak and failed growth patterns. What was required to explain poor growth were macro and institutional factors
beyond micro concepts of the firm, individual preferences, and endowments? Institutional analysis has been able to
explain the poor growth patterns much better than the market failure theories did. However, there is no generally
accepted institutional theory of economic development that a large share of development economists agree upon.
There is not even agreement on how important institutional factors are.
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