Economic Growth

v/s
Economic Development

Muhammad Nauman Rashid

Fa09-BBA-061

29-9-2010
 Submitted To

Mam SANA ASGHAR

Comsats Institute of Information Technology

Chak Shahzad Campus Islamabad

Economic Growth v/s Economic

Development

The word “Growth” refers to an increase in size, number, value and strength. It can either be
physical or personal while the term “Development” means increasing of other factors such as
mental, social, and character in an object at which we say person has some maturity.

Growth can be explained in terms of a physical quantity like increase in height or weight, while
development can be expressed as improvement of skills, coordination, and also physical such as
puberty. In growth, we talk about statistical facts which does not takes into consideration social
factors but development itself is in terms of social factors.

Suppose the example of a businessman, if a business man invests his surplus money in his or any
other business then it increases its assets and this refers to his growth but if he spends the same
money on the educational dues of his children or spends the money for the medical treatment of
his old lady then this act refers to his moral development.

Development in a country refers to the promotion of the whole country but when it comes to talk
about growth, it only triggers a specific part of that country. In other words growth is the
advancement of only one factor of a country while development is the general advancement in
every part and parcel of life.

When it comes to talk about “Economic Growth”, it refers to the change in the level of
production of goods and services in a country. This change in the level of production is known
as Gross Domestic Product (GDP). In other words economic growth can also be stated as a
quantitative output of a country and its fluctuation is based upon the placement of a country’s
resources.

It means how much quantity of goods and services a country can produce to earn revenues with
in a period of time, irrespective of whatever is the division of wealth, individual’s buying power,
whatever literacy rate and is also ignorant of poverty rates in that particular country. However in
some cases the economic development is based on the economic growth of a country.

Economic Growth does not indicate that every individual of that economy is getting benefited or
developed from that growth. If a particular sector of an economy is earning huge revenues but all
other sectors can’t enjoy the results of that progression then it can be stated as Economic
Growth.

Economic Growth depends upon the success or failure of economy so it can either be positive
for progressing countries or negative in the case of underdeveloped countries. Negative growth
can be referred to by saying that the economy is shrinking. Negative growth is associated with
economic recession and economic depression, the situation that we are currently facing in
Pakistan.

When it comes to talk about “Economic Development”, we say that it is a positive term which
refers to the progression of individuals living within an economy, an increase in the standards of
living of people of an economy and there purchasing power or talking more accurately the
income level of the people of that particular society is the considerate of the term Economic
Development.

Economic Development is a vast term which refers to social and technological improvement,
and its scope includes the process and policies by which a country improves the economic,
political, and social well-being of its people. Economic development includes improvements in a
variety of indicators such as

• Standards of Living / Income per Capita

• Education and Health Opportunities

• Purchasing power of Individuals

• Poverty rates

• Life expectancies

Both the terms Economic Growth and Economic Development differ from each other in their
meanings but at the same time economic development represents a dependent relation upon
economic growth. An economy will never develop if it doesn’t grow or does not have enough
resources.
There are numerous countries with high economic growth rate and very fewer economic
developments and at the same time there are countries which are developed but their growth rate
has started to decline due to some reasons.

According to Kofi Annan, former secretary general of United Nations

“A developed country is one that allows all its citizens to enjoy a free and healthy life in a safe
environment”

The list of countries of the world arranged by their gross domestic product growth rate shows the
increase in value of all final goods and services produced within a country in a given year, not
taking into account individual’s purchasing power parity and taking into account inflation.

Arranging countries according to increase in their growth rate we get Macau ranked as no 1 in
the world with a huge growth rate of 13.2% per year. Qatar is ranked as the second most
advancing country in terms of economic growth with an increase of about 9.5% per year.

Other countries include Azerbaijan and China as the 3rd and 4th most economically growing
countries of the world with the growth rate of approximately 9.3% and 8.7% per year and the
Ethiopia and India are ranked as the 5th and 6th most growing countries of the world with a huge
growth rate of 8.0% and 7.4% economic growth per year.

All these ranks are according to the CIA World Fact book and the observations are of the
preceding year 2009.

Meanwhile the list of all countries by Human Development Index as included in a United
Nations Development Program's Human Development Report released on 5 October 2009,
compiled on the basis of data from 2007.

It covers 180 UN member states along with Hong Kong and the Palestinian territories. Twelve
UN member states are not included due to lack of data. The average HDI of regions of the World
and groups of countries are also included for comparison.

The Human Development Index is a comparative measure of life expectancy, literacy, education
and standards of living for countries worldwide. It is a standard means of measuring well-being,
especially child welfare. It is used to distinguish whether the country is a developed, a
developing or an under-developed country, and also to measure the impact of economic policies
on quality of life. The index was developed in 1990 by Pakistani economist Mahbub ul Haq
and Indian economist Amartya Sen.

The human Development index rates countries on a scale of 0 – 1 According to Human

Development Index Norway is ranked as the no 1 country across the world with the highest
Economic Development rate of 0.971, Australia is ranked as the second most developed country
with the economic development rate of 0.970, Iceland is ranked 3rd with a development rate of
0.969 per year, Canada is ranked 4th with the development rate of 0.966, Ireland is 5th with the
rate of 0.965 and Netherland is ranked 6th with the development rate of approximately 0.964 per
year.

Apart from developed countries, countries that are ranked at the bottom of this list includes
Niger with the development rate of 0.340, Sierra Leone with the rate of 0.365, Central Africa
republic with the rate of 0.369, Mali at the rate of 0.371 and Burkina Faso at the rate of 0.389
development rate per year.

Asia is the most rapidly progressing continent of the world of the 20th century and is expected to
prosper at the same rate in the 21st century as well. It contains in itself many countries that
portray the image of huge growth rate but lack the factor of economic development. These
countries clearly discriminate growth from development.

To further demonstrate the difference between the terms Economic growth and Economic
Development let us take the example of CHINA, a country that is progressing every day. In
China industries are flourishing and there growth rate is increasing tremendously. The growth
rate of China is about 8.7% and it is ranked as the 4th most rapidly growing in all over the world
and ranked 1st in the continent in the fiscal year 2009,and when it comes to individual living
standards and all the other aspects of economic development that ranks are only because they are
putting their efforts in Economic Development. When it comes to economic development it is a
country with medium development and is ranked 92nd country in the world. In the late 1990s
China was a neglected country where nobody even wanted to go but they put their efforts in the
development of their people. People were trained in such a way that have created this difference
and improved their manpower and labor development, water management, health care and
communication facilities and services. All these aspects are well developed in China and they are
still working on this which has put a positive impact in its economy to make it one of the best in
the world.

Now in the case of INDIA, there economic growth is increasing rapidly at a rate of 7.4% per
year, they are ranked as the 6th most growing economy of the world and 2nd most growing
economy of the continent, but they aren’t even capable of solving the problem of poverty. In
India majority of the population are either unemployed or if employed then they don’t have
enough money to pass a peaceful and secured life. There living standard are very poor. There are
numerous people who sleep on the roads every day. Only a few million of the entire population
of India is upper class economy while the rest are those who are below the average line. Even
there is a huge number of people who pass their entire life in slums. India is a country with
medium level of economic development with a development rate of 0.612 per year and is ranked
as the 134th country in the list of HDI. The factor of economic growth is clearly visible there but
Economic Development is still missing.
Similar cases are seen in TIMOR-LESTE, LAOS and BANGLADEH as they are ranked 3rd 4th
and 5th countries of the Asia as per their Economic Growth but they don’t present the image of
economic development.

Form this we conclude that Economic growth and Economic development are different from
each other in their meanings and effects as both represent different images but in it can also be
said that they rely on each other in some cases.