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Economic Growth and
Economic Development
Subhalaxmi Mohapatra
October 12, 2009
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Coverage of the
PresentationGrowth Versus DevelopmentEconomic growth
Meaning
IndicatorsDevelopment
Meaning
Indicators
Benefits of economic growth
Costs of economic growth
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Growth Versus
DevelopmentEconomic Growth:
A measure of the value ofoutput of goods and services
over a period of timeEconomic Development:
A measure of the welfare ofhumans in a society
Economic growth may beone aspect of economicdevelopment but is not thesame
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Economic Growth
Economic growth measuresthe level of income of acountry but it does not takeinto account the incomedistribution.
Small section of thepopulation can own a largeproportion of the wealth inthe country. The level of
human welfare for themajority could therefore belimited.
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Indicators of Economic
GrowthGDPThe value of final goods and services producedwithin a country during a given period.
GNPThe value of final goods and services producedwithin a country plus the net factor income fromabroad.
GDP Per Capita or GNP per Capita
Takes into account the size of the populationReal GDP / GNP
Takes into account the adjustments for pricechanges and inflation.
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Economic Development
Development incorporates the notion ofa measure or measures of humanwelfare.
It is a normative concept open tointerpretation and subjectivity
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Human DevelopmentIndex
A socio-economic measure
Developed by the United Nations DevelopmentProgram (UNDP) to analyze systematically and
comprehensively the comparative status ofsocioeconomic development in differentcountries.
Focuses on three dimension of human welfare:
Longevity life expectancyKnowledge access to education, literacy rates
Standard of living GDP per capita, purchasingpower parity
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Measure of Human welfare
PovertyLevels of poverty
Absolute
Relative
Inequality
Sustainable development
Proportion of activity in differentsectors of the economy
Primary
Secondary
Tertiary
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Other MeasuresNumber of doctors per head
Disease indicators
Economic activity per sector
Stress levels
Crime levelsHealth care data
B fi f E i
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Benefits of EconomicGrowth
Increases in economic growth should enablemore of everything to be produced.
Increases possibility of providing consumergoods for all.
More consumer goods could be equated withbetter standard of living.
Wealth generated may trickle down to those
who are poor by means of income distribution through taxes and benefits, etc.
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Benefits of EconomicGrowth
Improved standard of livingassociated with increase in
the availability of luxurygoods
In addition
Infrastructure building like
roads, rail, energy,communication network etc.
Health and educationprovisioning
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Costs of Economic GrowthNot all income distributed equally andWealth often in the hands of a few
Trickle down of income not necessarilyalways work in practice
Corruption may reduce redistributioneffects
Growth funded in part by spending inweapons which do not benefit thepopulation as a whole.
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Costs of Economic GrowthEnvironmental problemsNegative externalities
Pollution dumping of hazardous waste
Environmental degradation over farmingreduces productivity of the soil, deforestationdamage to eco-systems and reduction in bio-diversity
Non- renewable resources finite resources
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Thank You