Overview

• Development perspectives 
• Development indicators 
• Methods of measuring development
• Common concept of Purchasing Power Parity (PPP)

Economic Growth

• Definition of Economic Growth:
  • Economic growth refers to the increase in the monetary value of all goods and services produced in an economy over a specific time period.
  • It is a quantitative measure that reflects the expansion of business transactions within the economy.
  • Examples : Increase in the overall length of roads in the country in a financial year, Increase in the number of hospitals in the country in a financial year, increase in the GDP of the country etc. 
• Indicators of Economic Growth:
  • Gross Domestic Product (GDP): GDP measures the total value of all final goods and services produced within a country’s borders during a given period.
  • Gross National Product (GNP): GNP includes the GDP plus net income from abroad, such as remittances or profits earned by domestic companies operating overseas.
  • Net Domestic Product (NDP) : GDP – Depreciation is NDP 
  • Net National Product (NNP) : GNP – Depreciation is NNP
• Importance of Economic Growth
  • Job Creation – economic growth leads no job creation and increased job opportunities as new businesses emerge.
  • Improved Living standards – if the income of individuals get increased, living standards increase automatically.
  • Increased Tax Revenues – as business and economic activity expands, tax revenues also increase. It allows the government to fund public services and investments.
  • Technological Advancements – economic growth also drives technological advancements and innovations, bolstering productivity gains and competition. 

Factors Affecting Economic Growth

1. Investment:
   • Public and private investment in infrastructure, education, healthcare, and R&D contribute to growth.
   • Example: Governments investing in renewable energy infrastructure for sustainable growth.
2. Human Capital Development:
   • Skilled and educated workforce enhances productivity and innovation.
   • Example: Prioritizing education and vocational training attracts investment and promotes growth.
3. Political Stability:
   • Stable political environment with effective governance and pro-business policies foster growth.
   • Example: Transparent legal systems and low corruption attract foreign investment.
4. Trade and Globalization:
   • Participation in international trade boosts growth by accessing larger consumer bases and fostering specialization.

Economic Development

• Definition of Economic Development:
  • Economic development refers to the process of improving the overall health, well-being, and academic level of a nation’s population.
  • It also encompasses advancements in production volume resulting from technological progress.
  • Basically, the improvement of lifestyle of people of a country indicates that it is economically developing. 

Measures of Economic Development

• Human Development Index (HDI) :

1. Definition:
   • The HDI is a summary measure of average achievement in key dimensions of human development: a long and healthy life, knowledge, and a decent standard of living.
2. Three Dimensions of HDI:
   • Health Dimension: Assessed by life expectancy at birth.
   • Education Dimension: Measured by mean years of schooling for adults and expected years of schooling for children.
   • Standard of Living Dimension: Measured by gross national income per capita.

Human Development Index

Measures of Economic Development

• Gender-Related Development Index (GDI):
  • The Gender-Related Development Index is a measure of gender inequalities in a country’s level of human development.
  • It incorporates the same dimensions as the Human Development Index (HDI) but adjusts them to reflect gender disparities.
  • The GDI considers disparities in life expectancy, education, and income between males and females.
• Gender Empowerment Measure (GEM):
  • The Gender Empowerment Measure assesses gender equality in political and economic participation and decision-making.
  • It focuses on three components: political participation and decision-making power, economic participation and decision-making power, and access to professional and managerial positions.
  • The GEM provides insights into gender disparities in power and influence within a society.
• Technology Achievement Index (TAI):
  • The Technology Achievement Index measures a country’s level of technological development and capacity.
  • It considers factors such as research and development expenditure, technological innovation, and the availability of information and communication technology infrastructure.
  • The TAI provides an indication of a country’s ability to adopt and utilize technology for socio-economic development.
• Ease of Doing Business (EODB):
  • The Ease of Doing Business index evaluates the regulatory environment and business-friendly reforms in a country.
  • It assesses factors such as starting a business, dealing with construction permits, getting credit, protecting minority investors, paying taxes, and enforcing contracts.
  • The EODB index aims to measure the efficiency and effectiveness of business regulations and practices, providing insights into the ease of conducting business activities in a country.

Goals of Economic Development

1. Income and Material Aspects:
   • People desire increased income and the ability to purchase material goods that contribute to their quality of life.
   • Money plays a crucial role in meeting basic needs and acquiring material possessions.
2. Non-Material Aspects:
   • Quality of life is influenced by non-material factors such as equal treatment, freedom, security, and respect for others.
   • These intangible aspects contribute significantly to overall well-being.
3. Development Goals:
   • Development encompasses a combination of goals that extend beyond financial prosperity.
   • It involves pursuing not only better income but also other vital aspects of life.

How to Compare Countries

• Income Comparison:
  • Income is a crucial factor for comparing countries’ development levels.
  • Higher incomes indicate more developed countries.
• Average Income:
  • Average income is calculated by dividing total income by the total population (per capita income).
  • It provides a more meaningful comparison of countries.
• Per Capita Income Classification:
  • World Development Reports use per capita income to classify countries.
  • Rich countries have a per capita income of US$ 12,056 or higher in 2017.
  • Low-income countries have a per capita income of US$ 955 or less (e.g., India).
• Income and Other Criteria:
  • Besides average income, public facilities are essential factors in assessing a nation or region.
  • Public facilities include infrastructure, sanitation, public transport, healthcare, and water services.

Sustainable Development

1. Sustainable Development:
   • Sustainable development meets present needs without harming future generations.
   • Current development practices are often considered unsustainable.
2. Examples of Unsustainable Practices:
   • Overuse of Groundwater: Excessive extraction of groundwater for agriculture, industry, and human consumption can lead to depletion of water sources and long-term water scarcity. Example: Aquifers being depleted faster than they can naturally recharge, impacting water availability.
   • Exhaustion of Natural Resources: Uncontrolled exploitation of natural resources, such as fossil fuels, minerals, and forests, depletes these resources faster than they can regenerate. Example: Deforestation causing loss of biodiversity and reducing carbon sink capacity.