Economic Growth vs Economic Development

Updated on April 9, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

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.read more/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.read more) 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
Economic Growth vs Economic Development

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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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Infographics

Economic Growth vs Economic Development

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Key Differences

Head-to-Head Comparison

ComparisonEconomic GrowthEconomic 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.
Concept


Economic growth is the “narrower” concept.



Economic development is the “broader” concept.
Nature of ApproachQuantitative in nature.Qualitative in nature.
ScopeThe 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 / TenureShort term in nature.Long-term in nature.
ApplicabilityDeveloped nations.Developing economies.
Measurement TechniquesIncrease in national income.Increase in real national income, i.e. per capita income.
Frequency of OccurrenceIn a certain period.Continuous process.
Government AidIt 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 DistributionEconomic 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.

Conclusion

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: –

Reader Interactions

Comments

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