Answer the question in maximum 300 words. This question carries 15 marks. [MPPSC 2019] Define and distinguish between economic growth and economic development. How is the qualitative concept of economie development expressed with the help of Human Development Index?
Economic Growth vs Economic Development — The Difference and the Human Development Index While economists often use the terms economic growth and economic development interchangeably, they refer to different concepts and are assessed according to different criteria. Whereas economic growth is measurRead more
Economic Growth vs Economic Development — The Difference and the Human Development Index
While economists often use the terms economic growth and economic development interchangeably, they refer to different concepts and are assessed according to different criteria. Whereas economic growth is measured in quantitative terms, mainly as the increase in a country’s economic production, economic development is a qualitative measure of progress across a wider range of factors, including social, health, and environmental factors. So, in this article, we will try to define these two indeed, and in this process, we will also learn how the qualitative aspects of economic development are expressed through the Human Development Index (HDI).
Economic Growth
Economic growth is generally considered the increase of an economy’s ability to produce goods and services during a specific time period. It is most often measured as the percentage change in Gross Domestic Product (GDP) or Gross National Product (GNP). It is being said that Economic growth goes a long way in determining the overall economic health of a nation and is also one of the factors to evaluate the effectiveness of various economic policies and strategies. Economic Growth
But economic growth is a narrow metric, encompassing only the financial and material aspects of an economy. It also doesn’t mean that people’s lives have improved or that issues with income inequality, education, health care, and environmental sustainability have been solved. In another example, a nation may have rapidly rising levels of oil extraction or industry activity, leading to high rates of economic growth, but this may not result in better rates of health, education, or other aspects of quality of life.
Economic Development
However, economic development is a more holistic approach than simple economic growth. A term that encompasses the process of making the economic, social, and political well-being of people better. It is not merely about boosting the production of goods and services, but rather about the growth of overall quality of life and making sure that the benefits of economic progress are distributed fairly throughout society.
Economic development Key points are the following:
Income Distribution: Different patterns of income distribution will be proposed according to the progress of the society and in order to express the propounding economic development.
The Importance of Education: Education is an essential factor in economic development as it prepares individuals for the job market.
Healthcare: Economic development creators also promote better healthcare, which translates into improved health outcomes and longer life expectancy.
Job opportunity: Employment is like the backbone of the economy help in development of the economy also keep people connected to the other part well in future that we know.
Infrastructure: Infrastructure systems, including roads and railways, bridges, airports, ports, power generation and transport systems, and also the energy supply, are also essential for growth.
Environmental sustainability: Economic development must promote sustainability, taking care of natural resources and the environment.
The Human Development Index (HDI)
The Human Development Index (HDI) is a composite statistic that ranks countries by level of economic development. Introduced by the UNDP [United Nations Development Programme] in 1990, it aims to offer a broader basis for delivering a measure of well-being than the GDP alone can provide. The HDI reflects three dimensions of human development:
Health: Quantified by life expectancy at birth, a reflection of the overall health and living conditions experienced by a country’s people.
Education: The average of years of schooling of adults 25 years of age and older, and expected years of schooling of school-age children, showing the scale of learning potential;
Living Standards: Measured by gross national income (GNI) per capita, which is indicative of resources available to individuals.
The HDI provides a more comprehensive perspective of a country’s success and welfare by intersecting these three aspects. This kind of analysis helps to draw attention to the qualitative aspects of economic development that tend to be obscured by strictly economic indicators such as GDP.
Qualitative Insights from the HDI into Economic Development
The HDI is a useful tool for articulate the qualitative aspects of economic development.
As with income, this measure is concerned with well-being, unlike GDP, a purely economic measure. It takes into account things like health and education, which are vital to high living standards.
Includes Social Indicators: The HDI has included social indicators like life expectancy and education within it, that are vital when it comes to the social aspect of economic development. Such indicators are useful in determining if growth is meaningful in improving social conditions.
Shines a Light on Inequality: The HDI can be modified to factor in how that growth is distributed, allowing a more fine-grained analysis of whether the gains of that growth are being fairly shared. The Inequality-adjusted Human Development Index (IHDI) is a measure of the human development index which adjusts the HDI to account for inequality in the distribution of these dimensions.
Promotes Sustainable Development: The HDI incentivizes countries to pursue sustainable economic development by taking living standards into account, ensuring economic growth does not hinder the quality of life of future generations. Good governance is especially relevant where environmental sustainability and resource management are concerned.
Conclusion
economic development In making this definition, there should not be confused with economic growth and economic development, because they are different and interconnected concepts. Economic growth is a necessary condition of economic development, but it is not a sufficient condition. To be able to assess how a country is doing in a specific domain, the assessment best comprises multidimensional factors, including qualitative factors such as health, education or income distribution. The Human Development Index (HDI) is an important metric that helps to reflect these qualitative aspects of economic development and gives us a better and more focused way to know about a nation’s well-being.
This two-pronged approach fits better for economies nowadays and policymakers should try to better shape the future by ensuring economic growth and economic development in their countries. This metric reinforces that economic advisers should not solely focus on boosting GDP, but rather should concentrate on enhancing the quality of life and creating an economic environment in which the spoils of progress are widely distributed.
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