HIMACHAL PRADESH

NATIONAL LAW UNIVERSITY

SHIMLA (H.P)

2018-2019

Assignment of Economics

TOPIC: MEANING OF ECONOMIC DEVELOPMENT.

DISTINCTION BETWEEN GROWTH, DEVELOPMENT AND
SUSTAINABLE DEVELOPMENT

SUBMITTED TO – MR. HARI CHAND

SUBMITTED BY – TARUN CHHAPOLA

B.A.LL.B (HONS.) 4TH SEMESTER

Roll No. - 10201718146

 Acknowledgement
Every project big or small is successful largely due to the efforts of a number of wonderful
people who have always given their valuable advice or lent a helping hand. I sincerely
appreciate the inspiration, support and guidance of all those people who have been
instrumental in making this project a success. I, TARUN CHHAPOLA, the student of H.P.
NATIONAL LAW UNIVERSITY (SHIMLA), am extremely grateful to H.P. NATIONAL
LAW UNIVERSITY (SHIMLA), for the confidence bestowed in me and entrusting my
ability. At this juncture. I extend my gratitude to my project guide, MR. HARI CHAND who
assisted me in compiling the project. I would also like to thank all the faculty members of
H.P. NATIONAL LAW UNIVERSITY (SHIMLA), for their critical advice and guidance
without which this project would not have been possible last but not the least I place a deep
sense of gratitude to my family members and my friends who have been a constant source of
inspiration during the preparation of this project.
INTRODUCTION:

Economic development is a process of economic transition involving structural

transformation of an economy through industrialization, raising gross national product and
per capital income.

Economic development not only includes quantitative changes in the economy but also
include certain qualitative or social changes like increase in rate of literacy improvement in
health care facility, reduction in economic divide, poverty and improvement in standard of
living etc.

According to Lewis, Economic development means increase in output per head

According to Calinclark: Economic development is simply an increase in economic

walfare.

According to Prof. Amartya Sen: Development is about creating freedom for people and
removing obstacles to greater freedom. Greater freedom enables people to choose their own
destiny. Obstacles to freedom, and hence to development, include poverty, lack of economic
opportunities, corruption, poor governance, lack of education and lack of health.

According to Prof. Meier and Baldwin: Economic Development is a process, whereby,

economy’s real national income increases over a long period of time.

According to Kindle Berger, Economic development means an increase in output of goods

and services in the economy. It is more important than economic growth because economic
development is more comprehensive process than economic growth. Economic growth is a
quantitative term as it represents quantitative increase in the production of goods, services
and factors of production, whereas economic development is a qualitative terms as it
indicates continuous increase in real national income and structural changes in the economy
of a country.

Elements/Factor Of Economic Development:

1. Increase in real national income.

2. Rise in real per capita.

3. Increase in economic walfare.

4. Increase in standard of living of the people.

5. Increase in leisure, political freedom and equal opportunities of life.

6. Increase in capital formation that is new buildings and industries.

Measurement of Economic Development Previously four methods including, national

income method, per capital income method, welfare method and social indicators method
were used for the measurement of economic development of a country but none of them
provided an acceptable answer.
According to Prof. Todaro, The Human Development Index method, which is prepared by
United Nations Development Program is the best method, which should be adopted by the
nations and organizations. This method includes the opportunities for education, health,
income, employment, environment and economic freedom.

Economic Factors Needed For Economic Development:

1. Natural Resources Natural resources are one of the three main factors of production the
other two are labor and capital. Natural resources include area of land, forests, rivers, climate
and mines. If a country is rich in better quality of all natural resources, it will develop
economically at a fast speed.

2. Capital Formation It is the process of adding net physical capital stock of an economy.
Capital formation creates productive potential for future production. Capital formation has
three stages namely • savings • financial institutions and capital market for mobilization of
savings • act of investment in machinery and buildings.

3. Specialization Output is greater as a result of specialization. Specialization enables an

economy to use its scarce resources more efficiently, thereby producing larger volume of
goods and services. It increases the rate of economic development of a country.

4. Technology Inventions and innovations reduce manufacturing and distribution costs.

Technological progress serves to change cost conditions in the long run; thus technological
changes play an important role in the economic development.
5. Transport and Communication Efficient communication facilities increase the
production capacity of all sectors of the economy. It reduces cost of production, increases
mobility of goods within and outside the country.
6. Entrepreneurship If an entrepreneurship is capable, skillful and trained then out put of his
organization will be greater. Entrepreneurship results in the introduction of new types of
output, new techniques and new sources of supply of inputs for business and industry.

Non-Economic Factors:
1. Social Values and Attitudes It includes culture, religion and life style of a society. Some
societies are orthodox and do not like material approach of life. Religion does not allow them
to keep themselves busy day in and day out for material prosperity. Most societies believe in
festivals and different cultural ceremonies. They do not prefer to save money; hence savings
rate reduces too much. In such societies material gains are not appreciated.

2. Political Stability Strong and stable Governments can prepare five-year development
plans, they can enforce monetary and fiscal policies and change social attitudes and
institutions, which may be progressive one. The frequent changes in Govt. setup results in the
lack of concrete economic policy decisions.

3. Administrative Efficiency Educated, trained, skillful and hardworking Govt. officers can
push development of a country at a very fast speed, whereas untrained administration of a
country retards the economic development.

4. Economic Freedom Private ownership of resources and maximum freedom to deploy

these resources in line with profit signals create strong incentives to work hard. If everybody
is allowed to participate in economic activity, then due to competition the rate of economic
development will increase.

5. Right of Private Property Private Ownership of the means of production results in the
increase in supply of goods and services. In order to own and accumulate profit and property,
people work hard, thus trade and business activity flourishes.
DISTINCTION BETWEEN GROWTH, DEVELOPMENT AND
SUSTAINABLE DEVELOPMENT:
Sustainable development requires a new integrative approach combining economic theory
with the study of natural sciences. The need of a new multidisciplinary concept has the gift of
smoothing the rigid boundaries between different current science, creating the premises of a
global view of all economic, social and environmental phenomena, within a homogeneous set
in which all interact with each other.
There are many discussions about sustainable development. The concept emerged in the '80s
as an attempt to create a bridge between economic progress, involving consumption of raw
materials and finding ways to save these resources and eliminate pollution factors.
Sustainable development combines all these three economic, social and environmental
components, while focusing on the human, on the cultural and social dimension, on technical
and scientific progress, however many understood in their interrelationships and, in time,
generating a higher level of development embodied in the concept of sustainable
development.

Economic growth and Economic development relationship:

In the context of the current global economic development necessarily arises the problem of
growth and economic development of countries around the world

Economic growth: Rise in the value of everything produced in the economy. It implies the
yearly increase in the country’s GDP or GNP in percentage terms. It indicates to considerable
rise in per-capita national product, over a period. i.e. the growth rate of increase in total
output, must be greater than the population growth rate.

GDP = P x Q

If price increases - not real growth.

If quantity increases - real growth.

Economic Growth is often contrasted with Economic Development, which is defined as the
increase in the economic wealth of a country or a particular area, for the welfare of its
residents. Here, you should know that economic growth is an essential but not the only
condition for economic development. Achieving high rates of economic growth is one of the
four main objectives of macroeconomic policy. Importance of growth lies in its contribution
to the general prosperity of the community. Economic growth is necessary because it allows
the community to consume more goods and services and also helps to ensure a larger quantity
of goods and services (health, education etc.), leading to real improvement in life standards.
However, accelerated economic growth can lead to depletion of natural resources and
worsening of environmental pollution problems.

COMPARISION CHART:

Basis for
Economic Growth Economic Development
Comparison

Economic Growth is the Economic Development involves rise in the

positive change in the real level of production in an economy along with
Meaning
output of the country in a the advancement of technology, improvement
particular span of time. in living standards and so on.

Concept Narrow Broad

Increase in the indicators

Improvement in life expectancy rate, infant
Scope like
mortality rate, literacy rate and poverty rates.
GDP, per capita income etc.

Term Short term process Long term process

Applicable to Developed Economies Developing Economies

How it can be Upward movement in

Upward movement in real national income.
measured? national income.

Which kind of
changes are Quantitative changes Qualitative and quantitative changes
expected?
Basis for
Economic Growth Economic Development
Comparison

Type of
Automatic Manual
process
When it
In a certain period of time. Continuous process.
arises?

The fundamental differences between economic growth and economic

development are explained in the points given below:

1. Economic growth is the positive change in the real output of the country in a particular
span of time economy. Economic Development involves a rise in the level of production in
an economy along with the advancement of technology, improvement in living standards and
so on.

2. Economic growth is one of the features of economic development.

3. Economic growth is an automatic process. Unlike economic development, which is the

outcome of planned and result-oriented activities.

4. Economic growth enables an increase in the indicators like GDP, per capita income, etc.
On the other hand, economic development enables improvement in the life expectancy rate,
infant mortality rate, literacy rate and poverty rates.

5. Economic growth can be measured when there is a positive change in the national income,
whereas economic development can be seen when there is an increase in real national
income.

6. Economic growth is a short-term process which takes into account yearly growth of the

economy. But if we talk about economic development it is a long term process.

7. Economic Growth applies to developed economies to gauge the quality of life, but as it is
an essential condition for the development, it applies to developing countries also. In contrast
to economic development applies to developing countries to measure progress.
8. Economic Growth results in quantitative changes, but economic development brings both
quantitative and qualitative changes.

9. Economic growth can be measured in a particular period. As opposed to economic

development is a continuous process so that it can be seen in the long run.

Example:

To understand the two terms economic growth and economic development, we will take an
example of a human being. The term growth of human beings simply means the increase in
their height and weight which is purely physical. But if you talk about human development, it
will take into account both the physical and abstract aspects like maturity level, attitudes,
habits, behavior, feelings, intelligence and so on.

In the like manner, growth of an economy can be measured through the increase in its size in
the current year in comparison to previous years, but economic development includes not
only physical but also non-physical aspects that can only be experienced like improvement in
the lifestyle of the inhabitants, increase in individual income, improvement in technology and
infrastructure, etc. Thus, variables such as poverty, explosive population growth,
environmental pollution, urban overcrowding, health, education, resource management
approach require a new vision of human society development.

SUSTAINABLE DEVELOPMENT - A REQUIRED MODEL FOR

GROWTH AND DEVELOPMENT:

Economists have used the term sustainable development in an attempt to clarify the balance
between economic growths on the one hand and conservation and protection of environment
on the other. Sustainable development refers to that development generation without
compromising the ability of the future generation to meet their own demands.

Thus economic growth will be sustainable if the stock of capital assets including land remains
constant or increases over time. Though the stock of natural resources is a part of capital
assets of a society, they are only limited substitutes of other types of capital assets.

It may however be noted that future economic development and quality of life crucially
depends on the natural resource base and quality of the environment. i.e. the quality of land,
water and air. To destroy and over-exploit the natural resources indiscriminately and pollute
the environment will though raise the short-term growth rate and living standards of the
people will have adverse effect on the long-term future growth and the quality of life of the
future generations as the latter will have smaller natural resource base and poor quality of
environment.

After World War II the problem is the limits of economic growth, taking into account the
accelerating population growth and consumption of non-renewable resources, with increasing
incomes and living standards.
In 1972 at the Stockholm Conference on the Environment initiated by the U.S. and
Scandinavia for the first time is presented the deterioration of the environment due to human
activities, which endanger the future of the planet and it is emphasized that economic
development is inextricably linked to social development if we are to ensure an environment
conducive to human existence and creation of necessary conditions on the Earth to improve
the quality of life. On this occasion the decision of establishing a UNO Environment
Programme under the auspices of the United Nations General Assembly.
The oil crisis in 1973 which pull the alarm on the depletion of natural resources, many
catastrophic of oil spill resulting in thousands of tons of oil into the seas and oceans, the
discovery in 1985 of the hole in the ozone layer over Antarctica, Chernobyl nuclear
catastrophe in 1986 and, more recently, the Fukushima catastrophe are sufficient and serious
reasons for humanity to take action on the future of the planet and the species of the earth.
Following a resolution adopted by the General Assembly of the United Nations, in 1983 the
World Commission on Environment and Development begins its work, chaired by
Norwegian Prime Minister Gro. H. Brundtland who was in charge with development of the
report on the environment. In 1985 the Vienna Convention is signed, which aims to find
solutions to reduce production and consumption of harmful substances for protective ozone
layer that surrounds the planet.
The report of the World Commission on Environment and Development in 1987, known as
the Brundtland Report, presents six definitions of sustainable development, but the most cited
of these, who became the leitmotif of international environmental policy, believes that
"sustainable development is the ability of mankind to satisfy the people's today needs without
cooperating the chance for future generations to meet their own needs "(Brundtland Report,
1987). Over time the concept has undergone many interpretations, so that, according to some
authors there are over 60 definitions of sustainable development, aspect which fully proves
that we are facing a very dynamic and complex concept encompassing many aspects of
contemporary society.
World Commission finds then the need to change destructive lifestyle, especially in
industrialized countries, by adopting concrete measures such as reducing the exploitation of
raw materials and reducing energy, water, mineral products and other natural resources
consumption. At the same time it requires global spread of eco-technologies, facilities
purification, recycling techniques. On this occasion was expressly stated the interdependence
between economic development and environmental protection.
The term sustainable development began, however, to be promoted and used increasingly
often as a result of the Conference on Environment and Development in Rio de Janeiro in
1992, organized by the United Nations, known as the " Earth Summit", unprecedented event
which brought together more than 100 heads of state, aiming to achieve a consistent program
of sustainable development, which addressed global problems facing humanity. We should
mention that the Declaration supports development while safeguarding the environment: "To
achieve sustainable development, environmental protection shall constitute an integral part of
the development process and cannot be considered in isolation from it" (The United Nations
Conference on Environment and Development, 1992), addressing the concept of sustainable
development in view of "reconciliation between economy and environment, as a new
development path to support human progress not only in some places and for some years, but
for the planet and for future long".
Actions for sustainable development continued through the Kyoto Protocol in 1997, by which
industrialized countries promised to cut emissions of greenhouse gases by 2012 in order to
achieve the objective of stabilizing the concentration of atmospheric gases that contribute to
the effect of emissions and the warming of the Earth, and in December 2012 States joined at
the United Nations Convention on Climate Change in Doha, approved the extension of the
Protocol by 2020. Regarding Brundtland report on sustainable development concept and
some authors are more skeptical about its implementation stating that "It is doubtful that a
sustainable, global development can be achieved given that in industrialized countries the
growth rate would increase with the speed suggested in the report.

CONCLUSION:
Despite the obvious diversity most developing nations share a set of common and well
defined goals. These include a reduction in poverty, inequality and unemployment the
provision of basic education, health, housing and food to every citizen the broadening of
economics and social opportunities and the forging of a cohesive nation-state, related to these
economic social and political goals are the common problems shared in varying degrees by
most developing countries: chronic absolute poverty, high levels of unemployment and
under employment, wide and growing disparities in the distribution of income, low levels of
agricultural productivity, sizable and growing imbalances between urban and rural levels of
living and economic opportunities, discontent on the part of the segments of the population
not benefiting from economic growth, serious and worsening environmental decay,
antiquated and inappropriate educational and health systems, balance of payments and
international debt problems and substantial dependence on foreign technologies, institutions
and values systems. Even with these weaknesses, there is much that developing countries can
do through appropriate policy strategies to speed up economic and social progress.
BIBLIOGRAPHY:
1. TANEJA M.L, MYER M.R ECONOMICS AND DEVELOPMENT AND PLANNING,
15TH EDITION, VISHAL PUBLISHING COMPANY JALANDHAR/DELHI.
2. www.economicsdiscussion.net
3. www.intelligenteconomist.com
4. www.investopedia.com
5. www.economicsonline.co.uk