Meaning of Economic Development, Economic growth verses Economic Development

The USA, Japan and European countries are called developed economies. India, China and Mexico are called developing economies Nepal, Sudan, Somalia etc countries are called undeveloped economies. Economic development is defined as a process of economic transition involving the structural transformation of an economy through industrialization and a rising of GNP and PCI. Economic development also involves a change in social altitudes cultural setup and institutional framework.

            Developed economy means an economy that has undergone the process of economic development. It reached a high level of income and utilizes us resources fully. The social attitudes, cultural setup and institutional framework support the optimum utilized of its resources and maintaining of income at a high level. An under developed nation can be termed as an economy which is trapped in vicious circle of development. It is characterized by low level of income, predominance of primary sector with primitive technology of production, inhibiting social altitudes, cultural set- up and institutional framework.

            A pattern of law income and low economic growth, which tends to perpetuate itself, is known as vicious circle of underdevelopment. Since the current consumption demands of poor nations are large in proportion to available income the saving and investment rates of these nations are low. In turn, the low investment rate returns future growth, causing poor nations to remain poor with unutilized resources.

Economic Growth Vs Economic development

Given the understanding of Economic Growth and Economic development, what is the concern of an economy? In which aspects these two differ?

First let us answer the second question. Think of a human being. When we take about growth, we generally refer to an increase in height and weight. When we talk about development, we refer to changes in a variety of factors that lead to an improvement in the overall functional capacity. In the same way, when we talk about economic growth we are in fact referring to the real output /productive capacity or real per capital income of an economy.

On the other hand economic development is a broad term covering not only real output or per capital income of the economy but various aspect relating to the structure of the economy but various aspect relating to the structure of the economy, techniques of production, social attitudes, cultural set-up and institutional framework of the economy. Therefore, economic growth and economic development differ in the scope of their coverage, growth is a narrow concept and development is more comprehensive than growth. That is why it is often said," there can be economic growth without economic development but there cannot be economic development without economic growth ".

Now what is the concern of an economy? Is it economic growth or economic development? Answer to this question depends on the stage of the economy, whether it is developed or developing /underdeveloped.