Economic growth and Economic development

Economic Growth
In simplest terms, economic growth refers to an increase in aggregate production in
an economy. It can be measured in nominal or real (adjusted for inflation) terms.
Traditionally, aggregate economic growth is measured in terms of gross national
product (GNP) or gross domestic product (GDP). Often, but not necessarily,
aggregate gains in production correlate with increased average marginal
productivity. That leads to an increase in incomes, inspiring consumers to open up
their wallets and buy more, which means a higher material quality of life or standard
of living.

In economics, growth is commonly modelled as a function of physical capital, human

capital, labour force, and technology. Simply put, increasing the quantity or quality of
the working age population, the tools that they have to work with, and the recipes
that they have available to combine labor, capital, and raw materials, will lead to
increased economic output.

Economic development 
Economic development is the process by which emerging economies become
advanced economies. In other words, the process by which countries with low living
standards become nations with high living standards, it also refers to the process by
which the overall health, well-being, and academic level the general population
improves.

During the development, there is a population shift from agriculture to industry, and
then to services. A longer average life expectancy, for example, is one of the results
of economic development. Improved productivity, higher literacy rates, and better
public education, are also consequences.

Put simply; economic development is all about improving living standards. ‘Improved

living standards’ refers to higher levels of education and literacy, workers’ income,
health, and lifespans.

Economic development vs. growth

Although the terms economic development and economic growth cover similar
concepts, they are not the same.

Economic growth
Economic growth is all about expanding GDP, i.e., making the size of the economy
bigger. GDP stands for gross domestic product.

GDP is the sum of all economic activity in a nation over a specific period. It is the net
value of all the products and services that an economy produces.
Economic development
Development, on the other hand, looks at a much wider range of statistic than simply
GDP or GDP per capita. GDP per capita is GDP divided by the total population.

Economic development looks at how the citizens of a country are affected. Apart
from their living standards, it also looks at the freedom they have to enjoy those
living standards.

Growth is not enough

Economic growth is a crucial condition for development. However, just growth is not
enough because it cannot guarantee development.

Amartya Kumar Sen, an Indian economist and philosopher, who received the Nobel
Memorial Prize in Economic Sciences, once said:

“Economic development is about creating freedom for people and removing

obstacles to greater freedom. Greater freedom enables people to choose their own
destiny.”

“Obstacles to freedom, and hence to development, include poverty, lack of economic

opportunities, corruption, poor governance, lack of education and lack of health.”

HDI
The HDI was created to emphasize that people and their capabilities should be the ultimate
criteria for assessing the development of a country, not economic growth alone. The HDI can
also be used to question national policy choices, asking how two countries with the same level of
GNI per capita can end up with different human development outcomes. These contrasts can
stimulate debate about government policy priorities.
The Human Development Index (HDI) is a summary measure of average achievement in key
dimensions of human development: a long and healthy life, being knowledgeable and have a
decent standard of living. The HDI is the geometric mean of normalized indices for each of the
three dimensions.
The health dimension is assessed by life expectancy at birth, the education dimension is
measured by mean of years of schooling for adults aged 25 years and more and expected years
of schooling for children of school entering age. The standard of living dimension is measured by
gross national income per capita. The HDI uses the logarithm of income, to reflect the
diminishing importance of income with increasing GNI. The scores for the three HDI dimension
indices are then aggregated into a composite index using geometric mean. Refer to Technical
notes for more details.
The HDI simplifies and captures only part of what human development entails. It does not reflect
on inequalities, poverty, human security, empowerment, etc. The HDRO offers the other
composite indices as broader proxy on some of the key issues of human development,
inequality, gender disparity and poverty.
A fuller picture of a country's level of human development requires analysis of other indicators
and information presented in the statistical annex of the report.
India’s ranking in HDI

As per Human Development Report 2020: Out of 189 countries, India has ranked
131 on the Human Development Index 2020 prepared by the United Nations
Development Programme (UNDP). With an HDI value of 0.645, the country fell in the
medium human development category. The UNDP has revised and updated the
underlying data and adjusted the goalpost, making it difficult to accurately compare
India’s ranking this year and in 2019. However, the UNDP in its country report gave
some statistics tracing India’s journey in human development between 1990 and
2019.
Talking about India’s Human Development Index: Trend over the years
The report stated that since 1990, the HDI value of India has increased to 0.645 from
0.429, registering an increase of over 50%. During the same period, the life
expectancy at birth in India rose by nearly 12 years, while mean years of schooling
witnessed an increase of 3.5 years. During this while, the expected years of
schooling also rose by 4.5 years. Moreover, during this period, GNI per capita of
India also increased, registering a rise of nearly 274%

Reasons for low HDI

Increasing Income Inequalities: Income inequalities amplify failings on other
HDI indices of human development. Intergenerational income mobility is lower
in countries with high-income inequality.

It manifests at birth and determines access to quality healthcare, education,

and opportunities.

Further, there is an increasing trend in income inequality. In India, the income

growth of the bottom 40% between 2000 and 2018 (58%) was significantly
below the average income growth for the entire population (122%).

Gender Inequality: Numbers show female per capita income in India was only
21.8% of that of males, while it was more than double at 49% in other
developing countries.
The meagre per capita income of females in India is mainly because of their
exclusion from the labour force.

Only 20.5% of the women in the working-age group were in the labour force,
pointing to its dismal Female Labour Force Participation Rate (LFPR).

The cumulative impact of these factors spills over across generations. It is this
intergenerational cycle which denies opportunities to those at the bottom of
the pyramid.