Difference between Economic Growth and Economic Development

Economic growth and economic development sound very similar but the two concepts appear to be very different.

What is Economic Growth?

Economic growth is the quantitative measure that shows the increase in the number of commercial transactions in an economy. It can be measured in terms of GDP(Gross Domestic Product), GNP(Gross National Product) that helps in expressing the size of the economy. It is an indicator of the progress of the economy since last year.

Things to know about GDP:-

Economists usually measure economic growth in terms of gross domestic product(GDP) or similar indicators, such as gross national product(GNP) or gross national income(GNI) which are only derived during GDP analysis. GDP is calculated from the country’s national accounts which consist of annual data on income, expenditure, and investment for each and every sector of the economy. Using this information, GDP is estimated or the total income earned by the country’s citizens(GNI/GNP).

There are three main types of ways of measuring GDP:-

• Approach for income(on people’s income)
• Approach for output(on the value of goods and services used to generate income)
• Approach for expenditure(on expenses of goods and services)

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What is Economic Development?

Economic Development is the entire advancement in the standard of living, improvement in technology, institutional changes, and progress in the socio-economic structure of the economy. It is about equitably sharing resources and benefits to make life easier and better for everyone.

Economic development cannot be only measured in the terms of GDP. It also includes analysis in other criteria such as HDI(Human Development Index), GDI(Gender Development Index), HPI(Human Poverty Index), infant mortality rate, literacy rate, etc.

Things to know about HDI:-

The limitations existing in the use of GDP to determine economic growth and development, have led to the establishment of other factors participating in the same. The most important factor is the HDI(Human Development Index). It is a composite index that rates countries taking into account their overall progress(or the opposite) in relation to three criteria, namely:-

1. Life expectancy
2. Education
3. Per capita GDP

Key differences between Economic growth and Economic Development:-

• Economic growth is a self-sustaining automated process. On the other hand, economic development is the result of planned and organized activities.
• Economic Development is directly proportional to economic development
• Economic growth is treated as a small part of the economic development agenda.
• Economic growth is quantitative development which increases the value of all goods in a country which leads to rising GDP, GNP, Income, etc. But economic development will have both quantitative and qualitative effects in the economy, for example, a decrease in mortality rate, an increase in literacy rate, etc.
• Economic growth is independent of government intervention but economic development is strictly driven by the policies made by the government.
• Economic Development is more appropriate to measure the progress of living standards in developing nations. Whereas, economic growth is a more relevant term in developing nations.
• Economic Development is directly proportional to economic growth. Sometimes, this does not happen because of the advancements of economic growth could be exhausted by a small section of wealthy communities.
• Economic growth is perceived in a specific period of time whereas economic development is continuous and never-ending.
• Economic Development is the expansion of the real GDP while economic development is the upliftment of living standards i.e health care, education, etc.

Is there a relationship between economic growth and economic development?

So, both the concepts are complementary to one another rather than supplementary. Without one, we can not imagine the other one. One has a theoretical basis whereas the other has a quantitative basis. Basically, to move ahead one has to be aware of one’s limitations, restrictions & constraints. It’s where the role of economic growth comes forward. On the other hand, to make progress, one has to make constant efforts, attempts. It’s where we have to look forward to economic development. In the modern era increase in education, health, housing is as necessary as that of an increase in energy, transport, and telecommunications to achieve a certain level of economic development and subsequently economic growth.

Example of Economic growth and development – India and South Asia