ECONOMIC GROWTH AND DEVELOPMENT

Sl.
Basis Economic Growth Economic Development
No.

The term economic The basic feature of

growth is only concerned economic development is
with raising income level to raise income level and
1 Definition
and volume of improve the human being.
production of goods and
services.

Economic growth is the Economic development is

key issue the main issue
under traditional under modern
economics. According to economics literature.
2 Nature
this approach “take care Accordingly, “take care of
of growth and poverty poverty and growth would
would eliminate take care of itself.”
automatically.”

Scope of economic Scope of economic

growth is narrow because development is wide and
it is concerned with comprehensive than
changes in income level economic growth. Its link
3 Scope
only. is not only with income
but also with the
prosperity of the society
and economy.

In case of economic Efficient institutional set-

growth strong and up is necessary. Effective
Institutional effective institutional set- and strong institutional
4
Changes
up is not necessary. revolution is the sign of
economic development.

According to various Economic development

Type Of economists, economic refers to the qualitative
5
Approach growth is said to approach.
be quantitative approach.

Economic growth is less The Concept of economic

important due to the development is more
6 Importance attachment with income important because it
level only. discusses an economy in
wider sense.

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Economic growth is Economic development is

a short-term process. We a long-term process about
can measure income 20 to 25 years. Because it
7 Time Span
changes yearly. So, its takes years to change
time span may be of one social, economic and
year. institutional set-up.

Economic growth is the Economic development is

National problem of developed the problem
8
Problem
countries of the world. of developing countries.

Economic growth is not The concept of economic

Political concerned with the development
9
Changes political stability. is incomplete without
political stability.

Economic growth does In case of economic

not ensure the freedom development our
Dependence from the dependence of dependence on other
10 And Self
foreign countries. countries reduces and
Sufficiency
country adopts the self-
reliance policy.

Economic growth first Economic development

Economic checks the statistical basically emphasizes on
11
Application upward movement in the the balanced growth of
economy. economy.

There may or may not be Social changes, in case of

any social changes in case economic
of economic growth. It development, are
12 Social Impact ignores the human beings compulsory. It refers to
and it is only concerned the better jobs,
with income level etc. availability of food, better
health and education etc.

Economic growth is not In economic

much attached with the development, more
human beings. It has no importance is given to the
Social
13 link with the good or bad. mankind as compare to
Welfare
the economic growth.

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In Pakistan, in Now, Pakistan is more

1960s, growth rate was developed country as
higher than the growth compare to 1960s and
Practical rate in 1990s. 1990s. Today in Pakistan
14
Significance
there is more industries,
universities and other
infrastructure etc.

Economic growth is Measurement of

measured only by economic development is
comparing income levels based on the reduction in
15 Measurement
of different years. It also poverty, development of
can be measured human being and living
numerically. standard etc.

Economic growth is Economic development is

Quantity And concerned concerned with not only
16
Quality with quantity of goods quantity but also with
and services only. the quality.

It is very difficult to Computation of economic

estimate exactly the level development is not a
Problem Of of economic growth in difficult task in developed
17
Assessment
developing countries like nations of the world.
Pakistan.

In economic growth, use For the economic

Use Of of advanced technology development use of
18
Technology is not appreciated. modern technology
is compulsory.

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BASIC CHARACTERISTIC OF AN UNDERDEVELPOED ECONOMY

 Low Level of Income: Underdeveloped countries are maintaining a very low

level of income in comparison to that of developed countries. The per capita
income of these groups of countries is extremely low if we compare it with that
of developed countries. Moreover, inequality in the distribution of income along
with this low level of income worsens the situation in these economies to a
disastrous level.
 Mass Poverty: Existence of chronic mass poverty is another characteristic of
underdeveloped economies. This problem of poverty arise not due to any
temporary economic maladjustment but arisen mainly due to existence of
orthodox method of production and social institutions. The degree of poverty in
these economies gradually increases due to increase in its size of population,
growing inequality in income and increasing price level. Nearly 76.8% of the
world populations are living in those underdeveloped or developing countries of
the world, enjoying only 15.6% of total, world GDP.
 Lack of capital formation : Developing or underdeveloped countries of the
world are suffering from poor rate of capital formation. As the levels of per
capital income in these countries are very low thus there volume and rate of
saving are also very poor. This has resulted lack of capital formation and which is
again responsible for low rate of investment in this countries. As for example, the
rate of investment in countries like India and Pakistan is lower than even 10%
but, on the other hand, the same rate is ranging between 10-20 % in developed
countries like U.S.A, Canada etc, thus this poor rate of capital formation is one of
the major obstacles towards the path of development of these underdeveloped
countries of the world.
 Heavy population pressure: The undeveloped countries are also characterized
by heavy population pressure. The natural growth rate of population in these
countries is very high due to its prevailing high birth rate and falling death rate.
This excessive population pressure has been creating the problem of low
standard of living and reduction in the average size of holding. This has also
resulted in low rate of capital formation in these countries. The populations in
these countries are increasing by 2-3% per annum which has created various
problems like scarcity of agricultural land, small size of holding, problem of
unemployment, food crisis, poverty etc.
 Agriculture backwardness: The underdeveloped countries are also suffering
from agricultural backwardness, although being the most important sector;
agricultural sector in these countries remains totally underdeveloped. But what
is more peculiar is that these countries are depending too much on this
agricultural sector. Nearly 60 to 70 percent of the total populations of these
countries are depending on agricultural and about 30 to 40 percent of the total
GNP of these countries are generated from agricultural production. Agricultural
productivity in these countries remain still very poor inspite of its great

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importance in these underdeveloped countries agriculturist are still following

tradition method and are applying modernize techniques on a very limited scale.
 Unemployment problems: Excessive population pressure and lack of
alternative occupation have resulted in huge unemployment problem in these
underdeveloped countries. In the absence of growth of alternative occupation
both in the secondary and tertiary sector of these countries, this increasing
number of population being thrown on land to eke out their living from
agricultural sector. This sort of increasing dependence on agricultural sector
leads to disguised unemployment or under – employment in these economies to
a large scale. Moreover, problem of educated unemployment in these economies
is also increasing gradually day by day due to lack of industrial development.
 Unexploited natural resources: For maintaining a rapid pace of economic
growth in these underdeveloped countries, procession of different type of
natural resources in sufficient quantity and its utilization are very important. But
underdeveloped countries are either suffering from scarcity of raw material or
from un-exploited natural resources of its own. If we look at the endowment
position of these countries then we can see that some of the undeveloped
countries are having natural resources like land, water, minerals, forest etc. in
sufficient quantity but these resources remain largely under-utilized or even
untapped due to various difficulties faced by these countries. These difficulties
include in accessibility of the region, shortage of capital, lack of proper attention,
primitive, technology, transport, bottlenecks and small extend of the market.
Thus by utilizing its natural resources, underdeveloped countries can develop
their economies with minimum initiative of their own.
 Shortage of technology & skills: Underdeveloped countries are facing low level
of technology and acute shortage of skills manpower. Poor technology & lower
skills are responsible for inefficient & inefficient production which leads to
poverty of masses. The paces of economic growth in these countries are very
slow due to application of poor technologies. But the application of modern
sophisticated technology both in agricultural & industrial sector is of utmost
need in these countries, this required sufficient amount of capital, technological
advancement & training.
 Lack of infrastructural development: Lack of infrastructural development is a
common feature of underdeveloped countries. In respect of transportation,
communication, generation and distribution of electricity, credit facilities, social
overheads etc. these countries are very much backward than most of the
developed countries. These due to inadequate infrastructural facility, the pace of
economic development in these countries are very slow.
 Lack of industrialization : Underdeveloped countries are characterized by lack
of industrial development the pace of industrialization in these countries is very
slow due to lack of capital formation, paucity in the supply of machinery and
tools and also due to lack of initiative development of these countries. Inspite of
having huge potential for industrial development, these countries could not
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develop the industrial sector on a sound footing. Moreover, whatever industrial

development that has been achieved by these countries is very much restricted
only to some limited areas.
 Lack of proper market: Underdeveloped countries are also suffering from lack
of properly developed market. Whatever market these countries have developed
these are suffering from number of limitation viz: lack of market information,
lack of diversification, lack of proper relation of connection between markets,
lack of adequate demand etc.
 Mass illiteracy: Underdeveloped countries are mostly characteristic by the
existence of mass illiteracy. Due to illiteracy the people in these countries are
very much superstitious and conservative which is again responsible for lack of
initiative and enterprise on the part of people of these countries.
 Poor socio-economic conditions: Underdeveloped countries are also suffering
from totally poor socio-economic condition. The paths of economic development
in these countries are being obstructed by various socio-economic factor like-
joint family systems, universal marriage, costly social custom & the law of in
heritage.
 Inefficient administrative set up: Underdeveloped countries are also suffering
from its existing inefficient administrative set up. In the absence of efficient &
sound administrative set up, these countries are suffering from lack of proper
economic organization, lack of investment & lack of appropriative decision
leading to total mismanagement of these economies.

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DETERMINATION OF ECONOMIC DEVELOPMENT

A. Economic factor :-
Economic factors are working as an important determinant of economic
development of a country. These factors can determine the pace of economic
development as well as the rate of growth of economy.

 Population & manpower resources :-

Population is considered as an important determinant of economic growth. In
this respect population is working both as a stimulant and hurdle to economic
growth.
On the other hand, higher rate of population can put serious hurdle on the path
of economic development. Moreover, growths of population at a higher rate
usually eat up all the benefit of economic development leading to a slow growth
of per capita income.
With proper human capital formation, increasing mobility & division of labour,
manpower resources can provide useful support to economic development.

 Natural resources & its utilization :-

Availability of natural resources & its proper utilization are considered as an
important determinant of economic development. If the countries are rich in
natural and adopted modern technology for its utilization, then they can attain
higher level of development at a quicker pace. Mere possession of natural
resources, cannot work as a determinant of economic development.
However, an economy having deficiency in natural resources is forced to depend
on foreign country for the supply of mineral and other raw material in order to
run its industry.

 Capital accumulation :-
Capital formulation & capital accumulation are playing an important role in the
process of economic development of the country. Here capital means the stock of
physical reproducible factor required for production. The increase in the volume
of capital formulation leads to capital accumulation. Thus, it is quite important to
accumulate a large stock of machines tool & equipment by the community for
gearing up production.
In the initial period, it is not possible to set up the rate of capital formation at the
required rate by domestic saving alone. Initially, to set up the rate of investment
in the economy, inflow of foreign capital to some extent is important.

 Capital-output ratio :-
Capital-output ratio is also considered as an important determinant of economic
development in a county. By capital-output ratio we mean number of unit of
capital required to produce per unit of output. It also refers to productivity of

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capital of different sector at a definite point of time. But the capital output ratio
in a county is also determined by stage of economic development reached and
the judicial mix of investment pattern. Moreover capital-output ratio with
national saving rate can determine the rate of growth of national income.
Rate of growth of GNP = saving ratio/capital output ratio
 Favorable investment pattern :-
Favorable investment pattern is an important determined of economic
development in a country. This requires proper section of industries as per
investment priorities and choice of production techniques so as to realize a low
capital-output ratio and also for achieving maximum productivity. Thus, in order
to attain economic development at a suitable rate, the government of the country
should make a choice of suitable investment criteria for the betterment of the
economy. The suitable investment criteria should maximize the social marginal
productivity and also make a balance between labour intensive and capital
intensive techniques.

 Occupational structure :-
Another determinant of economic development is the occupational structure of
the working population of the country. Too much dependence on agricultural
sector is not an encouraging situation for economic development. Increasing
pressure of working population on agriculture and other primary occupations
must be shifted gradually to the secondary and tertiary or services sector
through gradual development of these sectors.

 Extent of the market :-

Extent of the market is also considered as an important determinant of economic
development. Expansion of the scale of production and its diversification depend
very much on the size of the market prevailing in the country. Moreover, market
created in the foreign country is also working as a useful stimulant for the
expansion of primary, secondary and tertiary sector of the country leading to its
economic development.

 Technological advancement :-
Technological advancement is considered as an important determinant of
economic growth. By technological advancement we mean improved technical
know-how and its broad-based application. It include-
 use of technological progress for economic gains;
 Application of applied science resulting in innovations & inventions’;
 Utilization of innovations/inventions on a large scale
Thus, in order to attain a higher rate of development, the underdeveloped
countries should adopt only that type of technology which can suit their
requirement. Developing countries like Mexico, Brazil & India have been Appling

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technologies developed by advanced countries as per their own conditions and

requirements.

B. Non-economic factor :-
Economic factor alone not sufficient for determining the process of economic
development in a country In order to attain economic development, proper
social & political climate must be provided.

 Urge for development: - It is the mental urge for development of people in

general that is playing an important determinant for initiating and
accelerating the process or economic development. In order to attain
economic progress, people must be ready to bear both the suffering and
convenience.
 Change in social & institutional factor :-
Conservative and rigid social and institutional set up like joint family
system, caste system, traditional value of life, irrational behavior etc. put
severe obstacles on the path of economic development and to realize &
also retards its pace. Thus, to bring social and institutional change as per
changing environment and to realize the modern value of life are very
important for accelerating the pace of economic in a country.
 Proper maintenance of law & order :-
Maintenance of law & order in a proper manner also help the county to
attain economic development at a quicker pace. Stability, peace,
protection from external aggression and legal protection generally raise
morality, initiative and entrepreneurship. Formulation of proper
monetary and fiscal policy by an efficient government can provide
necessary climate for increased investment and also can stimulate capital
formulation in the county. Thus, in order to accelerate the pace of
economic development of law and order, defence, justice, security in
enjoyment of property, provision for standard weight and measure,
currency and formulation of appropriate monetary and fiscal of the
country.
 Administrative efficiency :-
Economic development of a county also demand existence of strong,
honest, efficient and competent machinery for the successful
implementation of government policies and programmer’s machinery
lends the country into chaos and disorder. Prof. Lewis has rightly
observed, “The behavior of the government play an important role in
stimulating or discouraging of economic achieving”. Therefore,
maintenance of proper administrative set up is a determinant of economic
development of a country.

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