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Economic Growth And

Development
Submitted By:
Shadan Nazir
Tazeem Anwar
Sakib khan

Contents
What is Economic Growth?
What are the determinants/sources/causes of economic growth?
What factors limit economic growth?
Public sector strategies in promoting Economic Growth.
Indicators Of Economic Growth.
What is Economic Development?
Sustainable Development.
Essential requirements for Economic Development.
Importance Of Agriculture in Economic Development.
Importance Of Industrialization in Economic Development.
Indicators Of Economic Development.
Factors Affecting Economic Growth And Development.
Difference Between Economic Growth And Development.
Some key highlights of Indian economy are listed below.

What is Economic Growth?


It is the persistent increase in the real GDP of a country
In other words it is the increase of the potential output or GDP
It can be shown as an outward shift of PPC
Here the production, output, income, expenditure, demand,
employment levels increase or appreciate leading the economy to
grow
Economic growth is a
destination(static output)

journey(dynamic

process)

but

Economic growth can be shown as an outward shift of the PPC

not

What are the determinants/sources/causes of


economic growth?
This is the process of upgrading the quality of all human lives

Provision of facilities for the people to enjoy a better standard of living


Through improvements in economic, social and cultural aspects
Economic development is with the improvement of economic growth
where growth benefits flow down to all people of the economy to ensure
acceptable living standards for everyone
Economic development is analyzed using different approaches because
there is no universal agreement as how to define standard of living
improvement of quality of life.
Following are the approaches used
Economic growth approach
Economic development approach
Basic needs approach

What factors limit Economic Growth?


Lack of capital formation
Lack of savings
Rapid population growth compared to the growth in output
Low labour productivity
Inadequacy of infrastructure facilities
Inefficiencies in public sector
Macro economic instability
Ethical issues and political instability
Cultural barriers
Unskilled labour
Imperfect labour markets

Public sector strategies in promoting Economic


Growth
Increase government spending on technological development
Increase government expenditure on infrastructure activities
Increase government expenditure on human capital development
Establish political stability
Keep interest rates at low level
Creating investor friendly economic environment
Establish macro economic stability
Promote private property rights
Establish a good tax system to promote savings and investments
Increase government expenditure on research and development

Indicators Of Economic Growth


National Income Increase in the rate of growth of real nation income is an
important measure of economic growth. Higher the rate of growth of national
income, bigger will be the care from which distribution of various citizens will take
place. All the citizens will benefits if population growth is not very high, rate of
investment is stable and income inequality is reduced.
Per Capita Income If the national income increases but population is increasing at
faster rate, then income available with each individual decreases. It is therefore
important for national income to grow at higher rate than population growth to
increase the welfare of the people.
Per Capita Consumption Ultimately the individual earns income to consume
either at present or in future. They can postpone their current consumption in order
to purchase durable products at a later time. Postponement is good for
underdeveloped countries. It increases the saving and can create new investment
opportunities leading to increase in national income in future. But in developed
countries it leads to low investment and pull the national income lower.

What is Economic Development?


Resource endowment
Productivity levels of the economy
Macro economic stability
Good governance
Political stability
Growth of opportunities for entrepreneurs
Increase in investments and stock of capital
Increase in the investment ratio
Creation of a favorable atmosphere inside the country to promote
foreign investments
Development of infrastructure facilities
Trained labour force

Sustainable Development
Sustainable development is the development which meets the
needs of the present generation without compromising the needs
of the future generation.
There are four types of capital necessary
for sustainable development
Physical capital
Human capital
Natural capital
Social capital
The sectors that needs improvement with
sustainable development
Economic development

Essential requirements for Economic


Development
Reduction in income disparity
Reduction in poverty and unemployment
Fulfillment of basic needs
Changes in economic structure
God governance
Balanced regional development
Sustainable development
Self sufficiency

Importance Of Agriculture in Economic


Development
Agricultural sector plays a strategic role in the process of economic
development of a country.
It is seen that increased agricultural output and productivity tend to
contribute substantially to an overall economic development of the country,
it will be rational and appropriate to place greater emphasis on further
development of the agricultural sector.
The leading industrialized countries of today were once predominantly
agricultural while the developing economies still have the dominance of
agriculture and it largely contributes to the national income.
Agriculture is the basic source of food supply of all the countries of the world
whether underdeveloped, developing or even developed. Due to heavy
pressure of population in underdeveloped and developing
Agricultural advancement is necessary for improving the supply of raw

Importance Of Industrialization in Economic


Development
Industrial development is necessary for modernisation of agriculture.
Industrial development encourages the development of science and technology.
Acute deficiency of capital is the main problem of Indian economy. In agricultural
sector, the surplus is small. So industrialization helps in capital formation.
Urbanisation succeeds industrialisation. Industrialisation in a particular region
brings growth of transport and communication.
Industrialisation plays an important role in the promotion of international trade.
Industrialization plays important role for proper utilization of resources.
Industrial development helps in the rapid growth of national and per capita
income.
A country cannot produce goods and services of high quality in order to attain
decent living standard without the progress of industrial sector.

Indicators Of Economic Development


Increase in literacy level The benefit of economic growth will not
spread to all sections of population till the population is literate and
can use their mental abilities.
Low Growth of Population An economy develops, rate of growth of
population tends to decrease.
Decrease in Inequality of Income Income inequality tends to decrease
as economic development takes place.
Increase in importance of Service Sector As the economic
development takes place, the share of agriculture sector decreases
and that of industry and service sector increases in the GDP.

Factors Affecting Economic Growth And


Development
1. Income -

Income is money that an individual or business receives in exchange for


providing a good or service or through investing capital.

2. Equity -

Non existence of high inequality in the distribution of income among


households is equity. This does not mean that income is equally distributed households.

3. Poverty -

Poverty refers to the state of inability to fulfill the basic needs. In other
words inability to obtain a minimum living standard acceptable in the society is poverty.

4. Population
Thetotalnumberofpersonsinhabitingacountry,city,oranydistrictor area.

5. Employment -

Employment is working for a public or private employer receiving


remuneration in wages, salary, commission, tips, piece rates, or pay in kind.

6. Unemployment -

Unemployment is the labor force that is currently unemployed. In


other words it is the proportion of working age adults unemployed.

Difference Between Economic Growth And


Development
Economic Growth does not take into account the size of the informal economy. The informal economy
is also known as the black economy which is unrecorded economic activity. Development alleviates
people from low standards of living into proper employment with suitable shelter. Economic Growth
does not take into account the depletion of natural resources which might lead to pollution,
congestion & disease.
Economic Development however is concerned with sustainability which means meeting the needs of
the present without compromising future needs. These environmental effects are becoming more of
a problem for Governments now that the pressure has increased on them due to Global warming.

Basis

Economic Development
Economic development implies changes in income,
savings and investment along with progressive changes
in socio-economic structure of country (institutional and
technological changes).

Economic Growth

Economic growth refers to an


increase in the real output of
goods and services in the
country.
Growth relates to a gradual
increase in one of the
Development relates to growth of human capital indexes,
components of Gross Domestic
Factors: a decrease in inequality figures, and structural changes
Product: consumption,
that improve the general population's quality of life.
government spending,

Difference Between Economic Growth And


Development Continued
Basis

Economic Development

Economic Growth

Qualitative.HDI (Human Development Index), genderMeasuremen


Quantitative. Increase in real
related index (GDI), Human poverty index (HPI),
t:
GDP. Shown by PPF.
infant mortality, literacy rate etc.
Concept:

Normative concept

Effect:

Brings qualitative and quantitative changes in the


economy

Relevance:

Economic development is more relevant to measure


progress and quality of life in developing nations.

Narrower concept than economic


development
Brings quantitative changes in
the economy
Economic growth is a more
relevant metric for progress in
developed countries. But it's
widely used in all countries
because growth is a necessary
condition for development.

Some key highlights of Indian economy are


listed below
India ranks second in agriculture or farm output. India have a large and
diverse agricultural sector, accounting, on average, for about 16% of GDP
and 10% of export earnings.
Manufacturing sector in addition to mining,quarrying , electricity and
gas together account for 27.6% of the GDP and employ 17% of the total
workforce.

Indiais fifteenthin services output. The Indian service industry has


emerged as one of the largest and fastest-growing sectors on the global
landscape and hence has made substantial contribution towards global
output and employment.This sector, accounting for 60 per cent of the
GDP, grew 5 per cent in the FY13.

Human Development Report 2013 released by theUnited Nations


Development Programmers (UNDP), ranked the country at a low 136
among 186 countries on human development (HDI) a composite

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