UNIT1

ConceptofEconomicgrowth
Economic growth is the increase in the amount of the goods and services produced by an
economyovertime.Itisconventionallymeasuredasthepercentrateofincreaseinrealgross
domesticproduct,orrealGDP.Growthisusuallycalculatedinrealterms,i.e.inflationadjusted
terms,inordertonetouttheeffectofinflationonthepriceofthegoodsandservicesproduced.
Ineconomics,"economicgrowth"or"economicgrowththeory"typicallyreferstogrowthof
potentialoutput,i.e.,productionat"fullemployment,"whichiscausedbygrowthinaggregate
demandorobservedoutput.
Economicgrowthfocusesonthedesiretoimproveacountry'sstandardoflivingthelevelof
goodsandservicesthat,onaverage,individualspurchaseorotherwisegainaccessto.Itshould
benotedthatifpopulationhasgrownalongwitheconomicproduction,increasesinGDPdonot
necessarilyresultinanimprovementinthestandardofliving.Whenthefocusisonstandardof
living,economicgrowthisexpressedonapercapitabasis.
Definitionof'EconomicGrowth':
Anincreaseinthecapacityofaneconomytoproducegoodsandservices,comparedfromone
periodoftimetoanother.Economicgrowthcanbemeasuredinnominalterms,whichinclude
inflation, or in real terms, which are adjusted for inflation. For comparing one country's
economicgrowthtoanother,GDPorGNPpercapitashouldbeusedasthesetakeintoaccount
populationdifferencesbetweencountries
Economicgrowthpercapitaisprimarilydrivenbyimprovementsinproductivity,alsocalled
economicefficiency.Increasedproductivitymeansproducingmoregoodsandserviceswiththe
sameinputsoflabor,capital,energy,and/ormaterials.Forexample,labourandlandproductivity
inagriculturewereincreasedduringtheGreenRevolution.TheGreenRevolutionofthe1940sto
1970sintroducednewgrainhybrids,whichincreasedyieldsaroundtheworld.
Economicdevelopmentgenerallyreferstothesustained,concertedactionsofpolicymakersand
communities that promote the standard of living and economic health of a specific area.
Economicdevelopmentcanalsobereferredtoasthequantitativeandqualitativechangesinthe
economy. Such actions can involve multiple areas including development of human capital,
criticalinfrastructure,regionalcompetitiveness,environmentalsustainability,socialinclusion,
health, safety, literacy, and other initiatives. Economic development differs from economic
growth. Whereas economic development is a policy intervention endeavor with aims of
economicandsocialwellbeingofpeople,economicgrowthisaphenomenonofmarket
productivityandriseinGDP.Consequently,aseconomistAmartyaSen.pointsout:economic
growthisoneaspectoftheprocessofeconomicdevelopment.

GROWTHANDDEVELOPMENT:
EconomicdevelopmentisabroadertermthaneconomicgrowthEconomicgrowthusuallymeans
thegrowthinproductionofaneconomy.Ontheotherhand,economicdevelopmentincludes
otherfactorssuchaslatencyhealth,childmortalityrate,equality,regionalbalance,etc.
ThedifferencebetweeneconomicgrowthandeconomicdevelopmentisasubtleFeaturesofthe
one.Letustaketheexampleofachild.Asachild grows herweightandheightincreases.
Simultaneously,hercapacitytolean,recognizeanddistinguishbetweenobjectsdevelops.Thus
growthisnotsufficient;weneeddevelopmentalso.Similarly,inthecaseoftheIndianeconomy
economic growth is not enough; we need economic development. We need better health of
people,educationforall,reductionininequalityamongsectionsofpeopleandregions,reduction
ininfantmortalityrate(IMR),accesstodrinkingwaterforall,etc.Thegovernmenthastodevise
policiesandallocategovernmentexpendituresothatthesefacilitiesaremeasurementofthelevel
ofeconomicdevelopmentisdifficult,becauseitdoesnotdependuponasinglefactor.
Thereareanumberofindicatorsofeconomicdevelopment.Theseindicatorscouldbequite
varied and too many .The per capita GDP along with annual growth rates of some of the
economies.Inordertomakecomparisonpossiblewehavegiventhesefiguresinacomparable
form(inpurchasingpowerparityUS$).YoucanseethatIndianeconomyisnotcomparableto
developedeconomies.ThepercapitaGDPinIndiaismuchlowerthanindevelopedcountries.
However,ithasahighergrowthratecomparedtoothers.Notethatsomeofthecountrieshave
very low GDP per capita and have experienced decline in it over time (see, Nigeria and
Tanzania,EconomicDevelopmentApartfromlowpercapitaincomeIndiaisfarbelow the
developedeconomiesintermsofdevelopmentindicators.
Someoftheseindicatorsareconsumptionofelectricity,literacyrate,accesstosafedrinking
water,empowermentofwomen,etc.UnitedNationsDevelopmentProgramme(UNDP)brings
outa'humandevelopmentindex'bycombiningseveralindicatorsofdevelopmentsuchaslife
expectancy,education,percapitaincome,andempowermentofwomen.AccordingtoHuman
DevelopmentReport2001,Indiaranks115outof162countriesintermsofhumandevelopment
index.ApositivefeatureoftheIndianeconomyisthatitisnotstagnant;itisdeveloping.Itis
one of the fastest growing economies in the world. There have been improvements in life
expectancy,literacy,andavailabilityofinfrastructure.