Economic Growth

A term coming from the life sciences, 'growth' in economics means economic growth. An increase in economic variables over a period of time is- economic growth. The term can be used in an individual case or in the case of an economy or for the whole world. The most important aspect of growth is its quantifiability, i.e., one can measure it in absolute terms. 2 All the units of measurement may be applied to show it, depending upon the economic variable, where the growth is being studied. We have a few examples:
(i) An economy might have been able to see growth in food production during a decade which could be measured in tonnes.
(ii) The growth of road network in an economy might be measured for a decade or any period in miles or kilometres.
(iii) Similarly, the value of the total production of an economy might be measured in currency terms which means the economy is growing.
(iv) Per capita income for an economy might be measured in monetary terms over a period.
We may say that economic growth is a
quantitativeprogress.
To calculate the growth rate of an economic variable the difference between the concerned period is converted into percentage form. For example, if a dairy farm owner produced 100 litre of milk last month and 105 litre in the following month, his dairy has a growth rate of 5 per cent. Similarly, we may calculate the growth rate of an economy for any given successive periods. Growth rate is an annual concept which may be used otherwise with the clear reference to the period for which it is used.
Though growth is a value neutral term, i.e., it might be positive or negative for an economy for a period, we generally use it in the positive sense. If economists say an economy is growing it means the economy is having a positive growth otherwise they use the term 'negative growth'.
Economic growth is a widely used term in economics which is useful in not only national level economic analyses and polic y making but also highly useful in the study of comparative
economics. International level financial and commercial institutions go for polic y making and future financial planning on the basis of the growth rate data available for the economies of the world.

Economic Development

For a comparatively longer period of time after the birth of economics, economists remained focused on aspects of expanding the quantity of production and income of a country's economy. The main issue economists discussed was-how to increase the quantity of production and income of a country or a nation-state. It was believed that once an economy is able to increase its production its income will also increase and there will be an automatic betterment (quality increase) in the lives of the people of the economy. There was no conscious discussion over the issue of quality expansion in the lives of the people. Economic growth was considered as a cause and effect for the betterment of lives of the people. This was the reason why economists till the 1950s failed to distinguish between growth and development though they knew the difference between these terms.
It was during the 1960s and in the later decades that economists came across many countries where the growth was comparatively higher, but the quality of life was comparatively low. The time had come to define economic development differently from what the world meant by economic growth. For economists, development indicates the quality of life in the economy which might be seen in accordance with the availability of so many variables such as:
(i) The level of nutrition
(ii) The expansion and the reach of healthcare facilities-hospitals, medicines, safe drinking water, vaccination, sanitation, etc.
(iii) The level of education among the people
(iv) Other variables on which the quality of life depends
Here, one basic thing must be kept in mind that if the masses are to be guaranteed with a basic minimum level of quality-enhancing inputs (above-given variables such as food, health, education, etc.) in their life, a minimum level of income has to be guaranteed for them. Income is generated from productive activities. It means that before assuring development we need to assure growth. Higher economic development requires higher economic growth. But it does not mean that a higher economic growth automatically brings in higher economic development-a confusion the early economists failed to clear. We may cite an example to understand the confusion: two families having same levels of income but spending differing amounts of money on developmental aspects. One might be giving little attention to health, education and going for saving and the other might not be saving but taking possible care of the issues of health and education. Here the latter necessarily will have higher development in comparison to the former. Thus, we may have some diverse cases of growth and development:
(i) Higher growth and higher development
(ii) Higher growth but lower development
(iii) Lower growth but higher development
The above-given combinations, though comparative in nature make one thing clear, that, just as for higher income and growth we need conscious efforts, same is true about the economic development and higher economic development.
Without a conscious public policy, development has not been possible anywhere in the world. Similarly, we can say, that without growth there cannot be development either.
The first such instance of growth without development, which the economists saw, was in the Gulf countries. These economies, though they had far higher levels of income and growth, the levels of development were not of comparable levels. Here started the branch of economics which will be known as 'development economics: After the arrival of the WB and the IMF, conscious economic policies were framed and prescribed for the growth and development ofless developed economies.
We can say that economic development is quantitative as well as qualitativeprogress in an economy. 3 It means, when we use the term growth we mean quantitative progress and when we use the term development we mean quantitative as well as qualitative progress. If economic growth is suitably used for development, it comes back to accelerate the growth and ultimately greater and greater population brought under the arena of development. Similarly, high growth with low development and ill-cared development finally results in fall in growth. Thus, there is a circular relationship between growth and development. This circular relationship broke down when the Great Depression occurred. Once the concept of the 'welfare state' got established, development became a matter of high concern for the governments of the world, polic y makers and economists alike. A whole new branch of economics-welfare economics has its origin in the concept of welfare state and the immediac y of development.

Measuring Development

Although economists were able to articulate the differences between growth and development (Mahbub ul Haq, a leading Pakistani economist had done it by the early 1970s), it took some more time when the right method of measuring development could be developed. It was an established fact that the goal of progress goes beyond mere 'increase in income'. International bodies such as the UNO, IMF and WB were concerned about the development of the comparatively underdeveloped regions of the world. But any attempt in this direction was only possible once there was a tool to know and measure the developmental level of an economy and the determinants which could be considered as the traits of development. The idea of developing a formula/method to measure the development was basically facing two kinds of difficulties:
(i) At one level it was difficult to define as to what constitutes development. Factors which could show development might be many, such as levels of income/ consumption, quality of consumption, healthcare, nutrition, safe drinking water,
literac y and education, social security, peaceful community life, availability of social prestige, entertainment, pollution-
free environment, etc. It has been a real difficult task to achieve consensus among the experts on these determinants of development.
(ii) At the second level it looked highly difficult to quantify a concept as development constitutes quantitative as well as qualitative aspects. It is easy to compare qualitative aspects such as
beauty, taste, etc., but to measure them we don't have any measuring scale