What Is The Importance Of Economic Development And Economic Growth?

Economic growth and development are very significant in this changing world as they tell us about a country’s economic health and the position which a country stand. Generally, economic growth refers to a rise in a country’s capacity to produce goods and services compared from one period to another. An indicator that measures growth is things like GDP, which measures the value of all final goods and services produce within domestic country in one year. Economic growth comes in two forms ̶ growing extensively by using more resources (physical or human capital) or intensively by using the same amount of resources but more efficiently. We can think of GDP as a cake while growth is the size of a cake. With higher growth, the larger cake we get

Those various indicators can also serve as a measure for the level of economic development. Normally, economic development means advancement in many other sectors as it creates a lot of opportunities such as in education sectors, healthcare sector, R&D or even environmental conservation. This can then lead to an increase in the per capita income. In order to achieve development, many economists suggest a country to go forward for modernization and industrialization.

Although people tend to use the word economic growth and economic development interchangeably, differences between them exist. Economic growth can be viewed as a sub-set of economic development and is a much narrower concept. In contrast, economic development requires corporation from government, who conducts policies, to stabilize political environment which would enhance the economy and welfare. Economic growth on the other hand is the capability of a country to produce more

For growth, there are natural resources, technological tool, growth of population, political constituent, social and psychological factor and education. For development, this includes vicious circle of poverty, productivity of human resource, efficient use of capital, political situation, socio-cultural constraints, international forces, religious factors and difficulty of adoption western technology. A country with high economic growth does not mean it will have high economic development. For example, in India, even though its GDP annual growth rate is of 6.9% (high), it has HDI of only 0.586 (quite low) and GDP per capita of US$ 1,497.50 (low). This implies a low income for the citizens and low level of standard of livings for many of Indian citizens. On the other hand, the US GDP annual growth rate was 2.2% (ideal growth rate) with HDI of 0.914 (high) and GDP per capita of US$ 53,042.00 (high). This shows that the US is very developed. Most US citizens enjoy high income, high literacy rate and high standard of livings. Hence, this shows that despite high economic growth, it does not mean that a country is prospering or developing much. India’s growth and development are very contradicting. Thus, it seems that India would still have to focus and invest more on many aspects of its country such as upgrading infrastructures, technology, sanitation