Difference Between Economic Growth and Economic Development
Economic growth is a conservative concept. It denotes the rise in a nation’s actual output level because of the increased quality of resources. Whereas economic development is comparatively a normative concept. It represents the enhancement in the standard of living of an individual and self-esteem needs.
What is Economic Growth?
The quantitative measure considers the rise in the output produced in an economyEconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society./nation in a particular period in its monetary value.
The key parameters of economic growth in any economy are its Gross Domestic Product (GDPGDPGDP per capita is a parameter that breaks down the GDP of a country to measure the economic prosperity of the citizens by simply dividing the GDP by the total population of that country.) and gross national product, which helps measure the actual size of an economy. So, for example, the GDP of India is 2.8 trillion USD (nominal value) and ranked 6th in the 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 quantitatively. It has many parameters to measure. A 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 view of an economy that considers an increase in the production level or output of an economy along with an improvement in the living standard of its citizens. It focuses more on socioeconomic factors than just a 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 an apt tool to measure the real growth in an economy. However, based on this, no countries are ranked. It includes the overall development regarding the standard of living GDP per capita, living conditions, government facilities, employment opportunities, the self-esteem of its people, and many other reforms/changes in the grass root of an economy.
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- As per the economist Amartya Sen, economic growth is one aspect of economic development. Also, the 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 growthEconomic GrowthEconomic growth refers to an increase in the aggregated production and market value of economic commodities and services in an economy over a specific period. is one aspect of economic development.
- A country can calculate economic growth in a specific period, whereas economic development is an ongoing/ continuous process that focuses more and more on 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. In contrast, economic growth is related to developed countries, but it can also apply its parameters to developing countries, including GDP, GNP, FDIFDIA foreign direct investment (FDI) is made by an individual or an organization, into a business located in a foreign country. The host nation receives job creation prospects, advanced technology, a higher standard of living, infrastructural development, and overall economic growth. investment, etc.
- Economic growth reflects the positive change in an economy. In comparison, economic development reflects the real difference in an economy.
- Economic growth is a quantitative factor that measures the total output or production. In contrast, economic development is the qualitative factor that emphasizes improving people’s living standards.
|Comparison||Economic Growth||Economic Development|
|Definition / Meaning|
It is the positive quantitative change in the output of an economy at a particular time.
It considers the rise in the output in an economy and the advancement of the HDI index, which assumes an increase in living standards, development in technology, and overall happiness index of a nation.
Economic growth is the “narrower” concept.
Economic development is the “broader” concept.
|Nature of Approach||Quantitative in nature.||Qualitative in nature.|
|Scope||The rise in parameters like GDP, GNP, FDI, FII, etc.||Rise in life expectancy rate, infant, improvement in literacy rate, infant mortality rate, poverty rate, etc.|
|Term / Tenure||Short term in nature.||Long-term in nature.|
|Applicability||Developed nations.||Developing economies.|
|Measurement Techniques||Increase in national income.||Increase in real national income, i.e. per capita income.|
|Frequency of Occurrence||In a certain period.||Continuous process.|
|Government Aid||It is an automatic process. So, it 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 the fair and equal distribution of wealth/income among all people.||It focuses on a balanced and equitable distribution of wealth among all individuals and uplifts downgraded societies.|
From the above discussion and knowledge, we can clearly say that economic development is a bigger concept and economic growth is its subset. In other words, economic development itself includes economic growth, as the former includes bigger parameters that increase the economic growth of an economy.
This article guides the top differences between economic growth and development. Here, we also discuss economic growth vs. economic development with examples, infographics, and a comparison table. You may also look at the following articles: –