What is Economic Development? How it is different from Economic Growth?

Modern economists don’t consider economic growth and development synonymous. For them, economic development is increase in standard of living with improvement in quality of the life; and economic growth is a means to attain economic development.  It is very much possible that a country’s real per capita income has increased but it has massive poverty, unemployment, high crime rate, low level of nutritional status and so on which indicates that it has grown but not developed.

So, to assess economic development, one needs to ask – what has been to the poverty, inequality and unemployment and other aspects of quality of life.

Hence, economic development aims at attainment of three objectives simultaneously.

• Increasing the availability of basic needs of life and ensuring these are distributed equitably.
• Raising the standards of living via higher incomes, better education and health facilities, enhancing individual and national self-esteem.
• Expanding the range of variety to individuals and nations economically as well as socially. It must eliminate ignorance and human misery.

Hence, quality of life is an important consideration in economic development.

Difference between Economic Growth & Development

We have already discussed that economic growth is a long term increase in real national output or real national income. It’s a single dimensional quantitative concept which is concerned only with the rate of increase in national income. It ignores distribution of income and it ignores qualitative aspects of human life.

Economic development is broader in nature. It not only includes the quantitative change but also includes certain qualitative changes in the economy. Economic development means not just increase in the real per capita income but also reduction in economic-divide, poverty, illiteracy and unemployment. Thus, economic development includes both economic growth as well as social welfare. Economic development should focus on inclusive growth – growth that includes all sectors of the economy and all sections of the society.

The key differences between Economic Growth and Development are as follows:

• Economic growth is a narrow concept (It studies only increase in real per capita income) while economic development is a broad concept (it studies increase in real per capita income as well as economic welfare).
• Economic growth is only a quantitative concept whereas economic development is both a quantitative as well as a qualitative concept.
• Economic growth ignores distribution of income. Economic development studies distribution of income.
• Economic growth is the essential element of progress of developed countries. Economic development is the essential element of the progress of under developed countries.

Further, economic development accounts for structural, institutional and technical change in the economy while economic growth does not.