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Introduction to Economic Development:

Definition, Scope, Pressing Issues and Challenges

Millennium Development Goals

Millennium Development Goals focused on ending extreme poverty, hunger and preventable
disease. It is the most important Global Development Goals. The leaders of every state signed
the historic millennium declaration at the United Nations Millennium Summit in 2000, they set
out a series of eight time-bound, with a deadline of 2015:
1. To eradicate extreme poverty and hunger;
a) Between 1990 and 2015, to halve the proportion of people living on less than $1.25 a
b) Achieve Full Employment and Decent Job for Women, Men, and Young People
c) Between 1990 and 2015, To halve the proportion of people who suffer from hunger
2. To achieve universal primary education;
a) By 2015, all youth should complete a primary schooling
3. To promote gender equality and empower women;
a) To end gender inequality in primary and secondary education by 2005 and at all levels by
4. To reduce child mortality;

a) Between 1990 and 2015, the under-five mortality rate should reduce by two-third

5. To improve maternal health;


a) Between 1990 and 2015, the maternal mortality ratio should reduce by three quarters,

b) Universal access to reproductive health must achieve by 2015


6. To combat HIV/AIDS, malaria, and other diseases;


a) To stop and begun to reverse the spread of HIV/AIDS by 2015

b) Achieved universal access to treatment for HIV/AIDS by 2010

c) To stop by 2015 and begun to reverse the incidence of malaria and other major diseases
7. To ensure environmental sustainability;
a) Integrate the principles of sustainable development into country policies and programs;
reverse loss of environmental resources
b) To reduce biodiversity loss and achieve a substantial reduction in the rate of loss by 2010
c) To halve the proportion of the universal population without sustainable access to clean and
safe drinking water and basic sanitation by 2015
d) To have achieved a significant improvement in the lives of at least 100 million slum-dwellers
by 2020
8. To develop a global partnership for development.
a) Develop further an open, rule-based, predictable, non-discriminatory trading and
financial system
b) Address the Special Needs of the Least Developed Countries (LDCs)
c) Address the special needs of landlocked developing countries and small island
developing States
d) Deal comprehensively with the debt problems of developing countries through national
and international measures in order to make debt sustainable in the long term
e) In co-operation with pharmaceutical companies, provide access to affordable, essential
drugs in developing countries
f) In co-operation with the private sector, make available the benefits of new technologies,
especially information and communications

Website: https://en.wikipedia.org/wiki/Millennium_Development_Goals

Sustainable Development Goals

Sustainable Development Goals are collection of 17 goals set by the United Nations General
Assembly in 2015 for the year 2020 to end poverty, ensure food security, make access to
healthcare universal, protect the environment and ensure prosperity for all as part of a new
sustainable development agenda. These goals consist of targets which should be achieved by
each participating country within the next 15 years. The fields of work as described by the
UN are:
1. No Poverty
End poverty in all forms and dimensions by 2030, we must target those living in
vulnerable situations, increasing access to basic resources and services, and support
communities affected by conflict and climate-related disasters.
2. Zero Hunger
End hunger, achieve food security and improved nutrition and promote sustainable
agriculture by 2030, making sure all people – especially children and the more vulnerable
– have access to sufficient and nutritious food all year round. This involves promoting
sustainable agricultural practices.
3. Good Health and Well-being
Ensure health and well-being for all, including a bold commitment to end the epidemics
of AIDS, tuberculosis, malaria and other communicable diseases by 2030. It also aims to
achieve universal health coverage, and provide access to safe and effective medicines
and vaccines for all.
4. Quality Education
Education is one of the most powerful and proven vehicles for sustainable development.
This goal ensures that all girls and boys complete free primary and secondary schooling
by 2030. It also aims to provide equal access to affordable vocational training, and to
eliminate gender and wealth disparities with the aim of achieving universal access to a
quality higher education.
5. Gender Equality
Ensuring that there is an end to discrimination against women everywhere. There are
still gross inequalities in access to paid employment in some regions, and significant

gaps between men and women in the labour market. Sexual violence and exploitation,
the unequal division of unpaid care and domestic work, and discrimination in public
decision making, all remain huge barriers.
6. Clean Water and Sanitation
Clean, accessible water for all is an indispensable part of the world we want to live in.
There is sufficient fresh water on the planet to achieve this. But due to bad economics or
poor infrastructure, every year millions of people, most of them children, die from
diseases associated with inadequate water supply, sanitation, and hygiene.
7. Affordable and Clean Energy
Energy is central to nearly every major challenge and opportunity the world faces today.
Be it for jobs, security, climate change, food production or increasing incomes, access to
energy by all is essential.
8. Decent Work and Economic Growth
To encourage sustained economic growth by achieving higher levels of productivity and
through technological innovation. Promoting policies that encourage entrepreneurship
and job creation are key to this, as are effective measures to eradicate forced labor,
slavery and human trafficking. With these targets in mind, the goal is to achieve full and
productive employment, and decent work, for all women and men by 2030.
9. Industry, Innovation and Infrastructure
Technological progress is also key to finding lasting solutions to both economic and
environmental challenges, such as providing new jobs and promoting energy efficiency.
Promoting sustainable industries, and investing in scientific research and innovation, are
all important ways to facilitate sustainable development.
10. Reducing Inequality
The international community has made significant strides towards lifting people out of
poverty. The most vulnerable nations – the least developed countries, the landlocked
developing countries and the small island developing states – continue to make inroads
into poverty reduction.
11. Sustainable Cities and Communities
Cities are hubs of ideas, commerce, culture, science, productivity, social development
and much more. At their preeminent, cities have enabled people to advance socially and

economically. However, many challenges exist in maintaining cities in a state such that
they continue to create jobs and prosperity without straining land and resources.
12. Responsible Consumption and Production
The efficient management of our shared natural resources, and the way we dispose of
toxic waste and pollutants, are important targets to achieve this goal. Encouraging
industries, businesses and consumers to recycle and reduce waste is equally important,
as is supporting developing countries to move towards more sustainable patterns of
consumption by 2030.
13. Climate Action
Climate change is now affecting every country on every continent. It is disrupting
national economies and transforming lives. It costs people, communities, and countries
dearly today. Take urgent action to combat climate change and its impacts.
14. Life Below Water
Sustainably manage and protect marine and coastal ecosystems from land-based
pollution, as well as address the impacts of ocean acidification. Enhancing conservation
and the sustainable use of ocean-based resources.
15. Life on Land
Conserve and restore the use of terrestrial ecosystems such as forests, wetlands,
drylands and mountains by 2020. Promoting the sustainable management of forests and
halting deforestations is also vital to mitigating the impact of climate change. Urgent
action must be taken to reduce the loss of natural habitats and biodiversity which are
part of our common heritage.
16. Peace, justice and strong institutions
This sustainable development goal is dedicated to promoting peaceful and inclusive
societies for sustainable development, the provision of access to justice for all, and
building effective, accountable institutions at all levels.
17. Partnerships for the Goals
A strong, sustainable development agenda requires intensive partnerships between
governments, the private sector, and civil society. We must put these goals into action.

Website: https://www.raptim.org/why-sustainable-development-goals-are-important/

Basic Indicators of Development/Growth Determinants

The Human Development Index (HDI) = 3√LEI.EI.II

The Human Development Index (HDI) is a statistical tool used to measure a country's overall
achievement in its social and economic dimensions. The social and economic dimensions of a
country are based on the health of people, their level of education attainment and their
standard of living. The HDI tracks changes in the level of development of countries over time.

The three measures in the index are:

The HDI combined three dimensions last used in its 2009 Report:
1. Life expectancy at birth, as an index of population health and longevity to HDI
2. Knowledge and education, as measured by the adult literacy rate (with two-thirds weighting) and
the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting).
3. Standard of living, as indicated by the natural logarithm of gross domestic product per capita at
purchasing power parity.
*The formula defining the HDI is promulgated by the United Nations Development Programme
(UNDP).[12] In general, to transform a raw variable, say x, into a unit-free index between 0 and 1
(which allows different indices to be added together), the following formula is used:
 x index = x – a *where a and b are the lowest and highest
values the variable x can attain, respectively.
*The Human Development Index (HDI) then represents the uniformly weighted sum with 1⁄3
contributed by each of the following factor indices:
 Life Expectancy Index = LE – 25 3 3
85-25 Adult Literacy Index (ALI) = ALR – 0
 GDP = log (GDPpc) – log (100) 100 – 0
Log (40 000) – log (100) Gross Enrollment Index (GEI) = CGER –
 Education Index = 2 x ALI + 1 x GEI

Gross National Income(GNI)

the sum of a country's gross domestic product (GDP) plus net income (positive or negative) from
abroad. It represents the value produced by a country's economy in a given year, regardless of
whether the source of the value created is domestic production or receipts from overseas.

Gross Domestic Product(GDP)

measures the income of anyone within a country's boundaries. It doesn't matter who produces
it. It includes anything earned by foreigners, including foreign businesses, while they are in the
country. GDP measures production while GNI measures income.

The components of GDP are:

personal consumption (C) + business investment (I) + government spending (G) + [exports - imports
GDP = C + I + G – X.

*GNI is calculated from GDP: GNI = GDP + [(income from citizens and businesses earned abroad) –
(income remitted by foreigners living in the country back to their home countries)]

*GNP is calculated from GDP: GNP = GDP + [(income earned on all foreign assets – income earned
by foreigners in the country)]

*GNI is calculated from GNP: GNI = GNP + [(income spent by foreigners within the country) –
(foreign income not remitted by citizens)]

Gender Inequality Index

A composite measure reflecting inequality in achievement between women and men in three
dimensions: reproductive health, empowerment and the labor market.

Dimension of GII:
 Maternal mortality ratio: Number of deaths due to pregnancy-related causes per 100,000 live
 Adolescent birth rate: Number of births to women ages 15–19 per 1,000 women ages 15–19.
Share of seats in parliament: Proportion of seats held by women in the national parliament
expressed as percentage of total seats. For countries with a bicameral legislative system, the
share of seats is calculated based on both houses.
 Population with at least some secondary education: Percentage of the population ages 25 and
older that has reached (but not necessarily completed) a secondary level of education.
 Labour force participation rate: Proportion of the working-age population (ages 15 and older)
that engages in the labour market, either by working or actively looking for work, expressed as a
percentage of the working-age population.

Steps to calculate the Gender Inequality Index:

Step 1: Treating zeros and extreme values
Because a geometric mean cannot be computed from zero values, a minimum value of 0.1
percent is set for all component indicators. Further, as higher maternal mortality suggests poorer
maternal health, for the maternal mortality ratio the maximum value is truncated at 1,000 deaths
per 100,000 births and the minimum value at 10. The rationale is that countries where maternal
mortality ratios exceed 1,000 do not differ in their inability to create conditions and support for
maternal health and that countries with 10 or fewer deaths per 100,000 births are performing at

essentially the same level and that small differences are random. Sensitivity analysis of the GII is
given in Gaye et al. (2010).

Step 2. Aggregating across dimensions within each gender group, using geometric means
Aggregating across dimensions for each gender group by the geometric mean makes the GII
association sensitive (see Seth 2009).

*For women and girls, the aggregation formula is: *For men and boys the formula is:
GF= 3√ ( 10 . 1 )1/2.(PRF . SEF)1/2 . LFPRF GM= 3√ 1 . (PRM .SEM )1/2 . LFPRM
*The rescaling by 0.1 of the maternal mortality ratio in equation 1 is needed to account for the
truncation of the maternal mortality ratio at 10.

Step 3. Aggregating across gender groups, using a harmonic mean

*The female and male indices are aggregated by the harmonic
mean to create the equally distributed gender index

HARM (GF , GM) = [(GF)–1 + (GM)–1]-1

*Using the harmonic mean of within-group geometric means captures the inequality between
women and men and adjusts for association between dimensions—that is, it accounts for the
overlapping inequalities in dimensions.

Step 4. Calculating the geometric mean of the arithmetic means for each indicator
The reference standard for computing inequality is obtained by aggregating female and male indices
using equal weights (thus treating the genders equally) and then aggregating the indices across
__ _____ _____________ ____ ______
GF . M = ∛ Health . Empowerment . LFPR where Health = (√10 . 1 + 1)/2 and
____________ ______ ________ ____
Empowerment = (√PRF . SEF + √ PRM . SEM) /2 and LFPR = LFPRF + LFPRM
Health should not be interpreted as an average of corresponding female and male indices but rather
as half the distance from the norms established for the reproductive health indicators— fewer
maternal deaths and fewer adolescent pregnancies.

Step 5. Calculating the Gender Inequality Index

*Comparing the equally distributed gender index to the reference standard yields the GII,
1 – HARM (GF , GM )

Website: https://revisesociology.com/2017/07/23/most-useful-indicators-development/

Purchasing Power Parity

PPP is a way of accounting for the differences in inflation rates and pricing in different
countries. Purchasing power is, in essence, the amount of goods one a person can
purchase with a certain amount of money in his home country. PPP refers to the price
point at which the people in one country could purchase the same goods as the people in
another country. In other words, it’s an economic adjustment that is based on what a
good is worth in a hypothetical common currency.

The underlying principle of PPP is a concept called “the law of one price.” This is an
economic assumption based on the notion that, all else being equal, the same goods in a
global market should have the same price. The law of one price relies on the theory that
goods of comparable quality and value to consumers will ultimately be driven by market
prices to equilibrium

Calculating Purchasing Power Parity:

The relative version of PPP is calculated with the following formula:

S= P1 where:

____ S= Exchange rate of currency 1 to currency 2

P2 P 1 = Cost of good X in currency 1

P 2 = Cost of good X in currency 2

Website: https://www.investopedia.com/updates/purchasing-power-parity-ppp/

New Human Development Index

The Human Development Index (HDI) is a statistic composite index of life expectancy,
education, and per capita income indicators, which are used to rank countries into four
tiers of human development. It is a statistical tool used to measure a country's overall
achievement in its social and economic dimensions. The social and economic
dimensions of a country are based on the health of people, their level of education
attainment and their standard of living.

The three measures in the index are:

1. Life Expectancy Index (LEI) = Life expectancy – 20
*LEI is 1 when Life expectancy at birth is 85 and 0 when Life expectancy at birth is 20.

2. Education Index (EI) = Mean years of schooling Index + Expected years of schooling Index
2.1 Mean Years of Schooling Index (MYSI) =MYSI
*Fifteen is the projected maximum of this indicator for 2025.
2.2 Expected Years of Schooling Index (EYSI) = EYSI
*Eighteen is equivalent to achieving a master's degree in most countries.
3. Income Index (II) = In(GNIpc) – In(100)
In(75 000) – In(100)
*II is 1 when GNI per capita is $75,000 and 0 when GNI per capita is $100.