Economic development is a fairly new idea that arose during the early twentieth century. Many theorists attempted to define economic development and to differentiate it from the concept of economic growth.According to economists, Gerald Meier and Dudley Seers, these two concepts are different from each other and they stressed that economic development cannot be equated with economic growth. They both agreed that economic development is a more complicated and dynamic process than economic growth but both are no doubt interrelated.
Economic growth is defined as an increase in a country’s ability to produce goods and services, in other words, increase of per capita gross domestic Product (GDP) or other measure of aggregate income. Economic Growth is the optimum utilisation and development of under-utilised resources of developed countries and brings significant changes in the economy. This growth is associated with a steady, general and gradual increase in the rate of savings, output and investment in the economy. Several economists have come to the conlclusion that productivity gains, ie increases in efficiency was a major factor in China’s immensely fast economic growth. Economic reforms which included the decentralization of economic production, led to substantial growth in Chinese household savings. http://www.fas.org
Economic development, on the other hand is an increase in the economic standard of living of a countrys population with constant growth from a stagnant state to a higher level of equilbrium. It implies changes in income, saving and investment along with accelerating changes in socio- economic structure of a country. Economic Development is concerned with whole changes in the economy and brings both qualitative and quantitative changes and mainly refers to the problem of developing countries. It relates to the utilisation and development of unused resources in underdevloped countries. After the mid-1980s India began opening up its market slowly through economic liberalization and this policy played a huge impact on the economic development of India. The Indian economic development got a boost through its economic reform in 1991 and again through its renewal in the 2000s. Since then, the whole scenario of economic development of India has changed dramatically. http://www.business.mapsofindia.com
Economic growth is a narrower concept than economic development. As earlier we stated, its termed as an increase in the real level of national output but this can only be caused by an increase in quality of resources, such as education, increase in quantity of resources and improvements in technology or increase in the value of goods and services produced by every sector of the economy.In Malaysia for example, Prime Minister Abdullah, after coming to power in 2003, has tried to develop economy of this south Asian country by introducing value added production. He took a number of measures to introduce hi-tech technologies and urged investments in high technology industries, medical technology and pharmaceuticals. www.economywatch.com
Economic development is a normative concept. According to Michael P. Todaro,an American economist, economic development is an increase in living standards, improvement in self-esteem needs and freedom from oppression. http://www.diffen.com/. Malaysia economic development is one of fastest and steady in global economic scenario. Malaysia GDP per capita has been estimated to be $14,700 in fiscal year 2009. https://www.cia.gov/. This is a clear indication of tremendous economic development in Malaysia. The most precise method of measuring development is the Human Development Index which takes literacy rates and life expectany into account which affects productivity and could lead to economic growth. Creation of more opportunities in sectors of education, healthcare, employment and conservation of environment can be opened up.
Economic growth does not take into account the external costs of an economy such as the depletion of natural resources which leads to pollution, diseases and congestion. Development is concerned with sustainability, ie, it meets the needs of the present without compromising future needs. These environmental affects have increased pressure on the Governements in general and have a become a massive problem for them due to global warming. The New York Times in 2007 published an article named , ” As China Roars, Pollution Reaches Deadly Extremes” in which is stated the pollution crisis in China . http://www.nytimes.com/2007/08/26/world/asia/26china.html . Economic Growth also does not also take the size of the informal economy into account. This informal economy also known as the black economy is an unrecorded economic activity.Development lessens people from low standards of living into proper employment with suitable shelter. Economic growth is essential but is not a sufficient condition of economic development
Economic development refers to social and technological progress. It shows change in the way goods and services are produced but on the other hand economic growth only indicates an increase in significant output, it may or may not involve development. Local and provincial governments in China were allowed to establish andoperate various enterprises on market principles, without interference from the central government. In addition, foreign direct investment (FDI) in China brought with it new
technology and processes that boosted efficiency.Economic development involves improvements in a variety of indicators such as literacy rates, life expectancy, and poverty rates but econommic growth does not take into account other aspects such as leisure time, environmental quality, freedom, or social justice.A country’s economic development is linked to its human development, which is surrounded among other things such as health and education. According to the World Bank, for a better economic development, India needs to give due priorities in various issues like infrastructure, public sector reform, agricultural and rural development, reforms in underdeveloped states, removal of labor regulations and HIV/AIDS.
Amartya Sen, a nobel memorial prize winner in economic sciences, http://en.wikipedia.org/wiki/Amartya_Sen, defined economic development in terms of personal freedom, freedom to choose from a variety of options. Economic growth may lead to an increase in the purchasing power of people but if the economy is repressed then there is lack ot choice and thus personal freedom is restricted. This clearly implies that growth has taken place without any development. Taking another example into consideration, increase in defence output of a nation accounts for an increased GDP but does not contribute to economic development. When we measure economic growth we are limited to increases in national income or per capita but when we measure economic development factors such as GDP, per capita income, poverty, life expectancy, infant mortality, etc is all taken into consideration. While economic growth may lead to improvements in the standard of living of a relatively small proprotion of population whilst the majority of the population remains poor. It is how the economic growth is spread among the population that determines the level of development.
Economic development involves a more complex process than economic growth. According to economist, Gerald Meier, economic growth remains an important signal of the achievement of development, in agreement with certain other stipulated outcomes. The concept of economic development differs from economic growth and has eventually more dimensions. Thus after reaching to a conclusion, economic growth and economic development are interrelated. Economic development may be considered our short term goal towards the achievement of an ideal life in the long run, and economic growth is one of the important factors necessary for bringing about economic development. It is a much broader term concerned with a lot more than just the monetary aspect of development. Hence it is true and it can be said that ‘Economic growth is a necessary but not sufficient condition of economic development.’