Concept of Economic

Development and Growth

 Economic Growth
Economic Development
mplications Economic development implies an upward movement of the entire social system in terms of income, savings and investment along with progressive changes in socioeconomic structure of country (institutional and technological changes). Economic growth refers to an increase over time in a country`s real output of goods and services (GNP) or real output per capita income.

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

Measurement Qualitative.HDI (Human Development Index), gender- related index (GDI), Human poverty index (HPI), infant mortality, literacy rate etc. Quantitative. Increases in real GDP.

Effect Brings qualitative and quantitativechanges in the economy Brings quantitative changes in the economy

Relevance Economic development is more relevant to measure progress and quality of life in developing nations. 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.

Scope Concerned with structural changes in the economy Growth is concerned with increase in the economy's output
Common Features
 Low levels of living
 Low levels of productivity
 High rates of population growth and dependency
burdens
 High and rising rates of unemployment and
underemployment
 Significant dependence on agricultural
production and primary product exports
 Dominance, dependence and vulnerability in
international relations
Vicious Cycle of Poverty &
Low-Level Equilibrium Trap

Low level of Savings

Low Level of Income

Low level of capital formation

Low productivity
Traditional Meaning of Development

Structural and sectoral changes in an

economy with respect to output and
employment share
Agricultural Share is highest
implies followed by industry and
Underdevelopment
services sector

implies Agricultural share declines industry and

Developing service sector increases with industry
share being the highest

implies
Developed Services sector share highest followed by
industry
 The Rostow’s stages of growth

Five stages
 Traditional
 Transitional(I&S grow
small%of GDP)
 Take-off(I&S grow
15%of GDP)
 Maturity
 High mass
Consumption(shift
towards tertiary sector
activity )
Three core values of New Definition
of development
 Life sustenance i.e., Ability to Meet Basic
Needs
 Self-esteem i.e., to be a Person
 Freedom for servitude i.e. to be Able to
Choose
Above framework is a multidimensional framework
Trade as a vehicle of growth

Two development strategies

Import substitution
Export-orientation

• Importance of International finance

• Trade as an Engine of growth
• Inequality reduction through trade?
• Economies of Scale – Growth of MNCs
Current Account in some developing
nations_ 2009
Current a/c balance as a % of gdp
Country
4.416
Argentina
-1.269
Brazil
7.808
China
-2.212
India
Russia 3.62
Source: World Economic Outlook, October 2009
What are the present challenges in
World economy?
Fall in long term growth
Limited investment
Near zero interest rate
Unfavorable demographic trend in many
countries
In-country inequalities
Rising unemployment due to automation
Limitation of GDP as Metric
 Shanti Mantra Meaning:
 Om Saha Nau-Avatu |  1: Om, May we be protected
 2: Together may we be
 Saha Nau Bhunaktu | nutured
 Saha Viiryam Karava-  3: Together may we work
Avahai | with great Energy and
 Tejasvi Nau-Adhii- Vigour,
Tam-Astu Maa  4: May our journey together
is dazzling and effective, not
Vidviss-Aavahai |
giving rise to any wicked
 Om Shaantih feelings between us,
Shaantih Shaantih ||  5: Om, Peace, Peace,
 Peace.

Importance of growth for all has been recognized way back

 Inclusive Growth strategy
 Long term objective of Productive Employment
instead of direct redistribution of income
 It means having access to essential services in
health and education by the poor.
 Creates new opportunities with access of equal
opportunities to all
 Growth beneficial to large proportion of people in
population
Barriers and Constraints for
Inclusive Growth
Geography
Human Capital
Health
Assets and Access to Credit
Economic Insecurity
Displacement due to Industrialization
 Policies to promote Inclusive
growth
 Enabling Environment
 Redistributive Public
Expenditure and Social
protection
 Human Capital and job
creation
 Broad-based Sectoral
growth
 Infrastructure
Development
 Partnerships
Relation between Inclusive Growth
and Sustainable Development
Sustainable Development – Securing
future generation
Inclusive Growth – Including all sections of
population in the growth process
Inclusive Growth with sustainability –
Sustainability in terms of productive
employment, education, and health for
both present and future generation. It is a
development of Economic , social and
environment alltogether.
Inclusive growth and development
framework
Development strategies in Indian
Planning
Mahalanobis Strategy
Gandhian Approach
Liberalization, Privatization and
Globalization Process (LPG)
Providing Urban Amenities to the Rural
Area (PURA)
 Mahalanobis strategy Gandhian Model growth
 To build a strong base for long-term  Gandhi called his ideal
growth society Sarvodaya. It is a
 To lay emphasis on the growth of society ensures the
capital goods industries ( heavy welfare and wellbeing of
industries) in stead of consumer
goods industries.
its member.
 Agriculture and Small scale sector  Stress on Agriculture
as a linkage through heavy industry  Cottage and village
 Inequality reduction through fiscal industries
policy
 Provision of wage goods
 Low stress on export orientation
to the urban mass
 Public sector importance
 Liberalization,
Privatization and
Globalization

LPG
 Main focus was on corporate sector which
account 10% of GDP
 The model by passes agriculture and agro
based industries. It did not delineate a
concrete policy to develop infrastructure.
Financial and technological support,
particularly the infrastructural needs of
agro-exports.
 To reduce fiscal deficits, disinvestment of
Public Sector
 Opening up of Private Sector in major
sectors
 LPG model hit the interests of the small
and medium sector engaged in the
production of consumer goods.
 FDI promoted
 Revival of Sick Public Sector units
 Export orientation in terms of liberal trade
 Finally the model emphasizes a capital-
intensive pattern of development and
there are serious apprehensions about its
employment-potential. It is being made
out that it may cause unemployment in
the short run but will take care.
PURA – A neo-Gandhian Approach
by APJ Abdul Kalam
 Providing Urban Amenities(like high cost
advanced technology) in Rural Areas
 Linking a loop of villages by a ring road
about 30 km circumference.
 Treating rural development as CSR
 Agriculture and Processing
 Rural fund for investment not for
consumption.
 Industry and services should be given
priority in job creation and employment.
 Compensation to farmers should be given
for the land acquired by an annual fee equal
to twice the price of the produce they grow,
not by lump sum money.
 Reliable quality electric power for all
 Education and Health
 Expansion of information and
communication technology to rural areas
 Providing same per capita investment to
rural area as cities do.
Four Connectivities in PURA
Model

Physical

Economic

Electronic
knowledge
ACME Telepower’s Model of Rural
Livelihood
Knowledge Connectivity
Cold Storage
Using Renewable Energy

Preservation of fruits Electronic Connectivity

Retail outlet Economic Connectivity

Employment Generation in Rural Area

No wastage of fruits
Common Service Centres
Project GoI Initiatives - PPP
CSC

To promote Village Level entrepreneur Provide connectivity services,

other digital services,
non-digital services
Entrepreneurial Ability

Telecommunication Infrastructure Electronic Connectivity

Road Infrastructure Power Infrastructure

Knowledge Connectivity
Spread of Internet Awareness Approval of G to C Services
Eleventh Five Year Plan’s
Approach to Inclusive Growth
“Towards faster and more Inclusive
growth”
Lack of inclusiveness addressing SC/ST,
Minorities and Women
Vision
Generation of adequate productive
employment opportunities
Access to essential services
Social Justice and Empowerment
Vision
Policy designed
 Generation of adequate  To enhance central
productive employment budgetary provision
opportunities towards centrally
 Access to essential sponsored schemes
services already implemented in
 Social Justice and the Tenth plan on social
Empowerment infrastructure, viz.,
National Rural
Employment Generation
Scheme, Sarva Shiksha
Abhiyan, Bharat Nirman,
etc.
Requirements for Inclusive Growth

Agriculture and Rural Development

Need to develop the Non-Farm Sector
Technological Infusion to Provide
Education
Technological Infusion to Provide Health
Care
Technological Infusion to provide Financial
Inclusion
Role of Private Sector in Inclusive
Growth – Exploit Opportunities?
Formation of Social Entrepreneurship
Providing for Health and Education
through CSR
ICT led innovative Rural development
Business oriented strategies to upgrade
quality of living
Generating Quality Employment
PPP in Infrastructure Development
Financial Inclusion