Difference Between Economic Growth and Economic Development
Economic growth is a conservative concept and it denotes the rise in a nations’ actual level of output on account of the rise in quality of resources whereas economic development is comparatively a normative concept, and it denotes the enhancement in the standard of living of an individual, and self-esteem needs.
What is Economic Growth?
It is the quantitative measure that considers the rise in the output produced in an economy/nation in a particular period in its monetary value.
The key parameters of economic growth in any economy are its Gross Domestic Product (GDP) and gross national product which helps in measuring the actual size of an economy. For example, we say the GDP of India is 2.8 trillion USD (nominal value) and ranked 6thin globe whereas the GDP of the United States of America is 19.3 trillion USD and ranked one.
It shows how much the production of goods and services has increased compared to last year in a quantitative manner. It has many parameters to measure and few of them are as below:
- Human Resources
- Natural Resource
- Advancement in technology
- Capital formation
- Political and social-economic factors
What is Economic Development?
Economic development projects a broader picture of an economy which takes into account an increase in production level or output of an economy along with an improvement in the living standard of its citizens. It focuses more on socioeconomic factors rather than just quantitative increase in production.
Economic development is a qualitative measure that measures improvement in technology, labor reforms, rising living standards, broader institutional changes in an economy.
HDI index (Human development) is apt tool to measure the real development in an economy and based on this no countries are ranked as it includes the overall development regarding the standard of living GDP per capita, living conditions, government facilities, employment opportunities, self-esteem of its people and many more other reforms/changes in grass root of an economy.
- As per the economist Amartya Sen, economic growth is one aspect of economic development. Also, united Nations sees it as this “Economic development focuses not only on man’s materialistic need but it focuses on overall development or rise in its living standards.
- In simple terms, economic growth is one aspect of economic development.
- Economic growth can be calculated in a specific period of time whereas economic development is an ongoing/ continuous process that focuses more and more advancement in the lives of individuals.
- Economic development is more related to developing countries like India, Bangladesh, South Africa where it measures the improvement in the HDI index whereas economic growth is moreover related to developed countries but its parameters can be applied to developing countries also as these parameters include GDP, GNP, FDIFDIA foreign direct investment, or FDI, is a financial investment made by an individual or an organization in a business based in another country. In such investment, an organization or an individual owns a minimum of ten percent of the shares of a foreign firm. investment, etc.
- The economic growth reflects the positive change in an economy whereas economic development reflects the real change in an economy.
- Economic growth is a quantitative factor that measures what is the total output or production of a country whereas economic development is the qualitative factor that gives emphasis on improvement in the quality of living standards of its people.
Head to Head Comparison
|Comparison||Economic Growth||Economic Development|
|Definition / Meaning||It is the positive quantitative change in the output of an economy in a particular time period||It considers the rise in the output in an economy along with the advancement of the HDI index which considers a rise in living standards, advancement in technology and overall happiness index of a nation.|
|Concept||Economic growth is the “Narrower” concept||Economic development is the “Broader” concept|
|Nature of Approach||Quantitative in nature||Qualitative in nature|
|Scope||Rise in parameters like GDP, GNP, FDI,FII etc.||Rise in life expectancy rate, infant, improvement in literacy rate, infant mortality rate and poverty rate etc.|
|Term / Tenure||Short term in nature||Long-term in nature|
|Applicability||Developed nation||Developing economies|
|Measurement Techniques||Increase in national income||Increase in real national incomeNational IncomeThe national income formula calculates the value of total items manufactured in-country by its residents and income received by its residents by adding together consumption, government expenditure, investments made within the country and its net exports. i.e. per capita incomeCapita IncomeThe per capita income formula depicts the average income of a region computed by dividing the total income of that area by the total population of the region. It is used to figure out the average income of a city, provision, state, country, etc.|
|Frequency of Occurrence||In a certain period of time||Continuous process|
|Government Aid||It is an automatic process so may not require government support/aid or intervention||Highly dependent on government intervention as it includes widespread policies changes so without government intervention it is not possible|
|Wealth Distribution||Economic growth does not emphasize on the fair and equal distribution of wealth/income among all its people.||It focuses on a balanced and equitable distribution of wealth among all individuals and tries to uplift the downgrade societies.|
Well from the above discussion and knowledge we can clearly say that economic development is a bigger concept and economic growth is its subset. Or in other terms, economic development itself includes economic growth as the former includes bigger parameters which themselves increase the economic growth of an economy.
This has been a guide to the top differences between economic growth and economic development. Here we also discuss economic growth vs economic development with examples, infographics, and comparison table. You may also have a look at the following articles –