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What is the difference between Economic Growth & Economic Development?

Economic development is a normative concept meaning that the definition is variable however, the definition given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression aswell as a greater choice. The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affect productivity and could lead to Economic Growth. Economic Growth is an increase in a country's real level of national output which can be caused by an increase in the quality of resources by education etc, increase in the quantity of resources & improvements in technology. Economic Growth can be measured by an increase in a country's GDP. However this does not necessarily mean that development has occured. There is an issue of the distribution of income. It is thought that an increase in a country's GDP means everyone benefits however this increase might only benefit the rich. This creates alienation, encourages crime and threatens social cohesion. This can be justified on the grounds that wealth will eventually trickle down, the 'trickle down' effect. But the problem this creates is that it is far too slow compared to other development policies for example an increase in government spending on health and education. Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion & disease. Development however is concerned with sustainability which means meeting the needs of the present without compromising future needs. These environmental effects are becoming more of a problem for Governments now that the pressure has increased on them due to Global warming. Economic Growth does not take into account the size of the informal economy. The informal economy is also known as the black economy which is unrecorded economic activity which in most cases is illegal. This stifles development because it creates urban congestion & allows disease to be spread more quickly. The informal economy also has very little regard for health & safety issues. The government can not collect taxes from them and hence they can not use that money to spend on health and education. Developement alleviates people from low standards of living into proper employment with suitable shelter. Using GDP as a measurement of Development is inaccurate because the exchange rate is not taken into account and the actual level of income might be very different. This can be resolved if the Purchasing Power Parity is used which takes into account the different price levels in country's. The HDI is more effective in measuring development however, this also has to be taken with caution as there are other elements such as access to clean water & doctors per 1000 which can also be used that are not included in the HDI. Overall, to conclude, Growth is just one dimension of development. Economic Growth is a necessary but not a sufficient condition for development because GDP per capita might be rising but at the same time, poverty might be increasing, inquality rising and massive environmental damage might be occurring

The start for preparing the country for future advancement was made by launching a Six Year Development Programmer (1951-57) named as Colombo Plan. it is accompanied by unequal distribution of wealth. The investment of the banks is mostly on consumer products.4% in 1999-2000. The main obstacles which have affected the rate of growth in Pakistan are grouped under following heads. The major portion of the population is just above the poverty line (poverty line 23. large tax exemptions and incentives. the Government of Pakistan is making rigorous efforts to build up infrastructure and productive potential of the economy through the process of development planning. tax evasions. the tax GDP ratio stands at around 9. The external debt even now stands at $ 38.2% in 2006-07. heavy reliance on foreign trade taxes. large scale defaults in payment of loans were great fault lines of the economy. (1) Economic obstacles (2) Social and cultural obstacles (3) Administrative obstacles. In addition to the Colombo Plan. The 8th Five Year Plan (1993-98) has been implemented. . due to rapid economic growth from 2000 onward. inelastic tax system. During the last five years. It was brought down to 5. the banking sector is earning profits. complex tax laws. The Sixth and Seventh Five Year Plan are complete. The present government has succeeded in bringing its down to 4. If the economic performance since 1947 is evaluated. defense and bebt serving are taking a very major share of the current revenue. On the expenditure side. The large fiscal deficits reduces the capacity of the government to spend on key development activates. Pakistan has devised various strategies to quicken the tempo of economic development but it has not been able to break the vicious circle of poverty and enter into take off stage.5% during the last several years.8 billion in 2007.9%) The disturbing feature of the economy is that whatever economic growth has been achieved. It is mainly attributable to narrow tax base. However. serious efforts are being made to reduce the external liabilities as far as possible. On the revenue side. The second major economic impediment to economic development was that the public sector banks and development financial institutions (DFI's) were mainly in crisis. |This has created social tension in the country and has slowed down the rate of economic growth. (2) Fiscal deficit. Excessive bank credits. the overall results are not very encouraging. (3) Banking and Financial Sector in Crisis.OBSTACLES TO ECONOMIC DEVELOPMENT IN PAKISTAN Pakistan inherited an extremely narrow economic base at the time of Partition in 1947 Since then. The overall budget deficit was 8% of GDP in 1990-91. Five other Five Year Development Plans were drawn up and implemented. The Plan was suspended two years before its completion due to the repercussions of Korea War. Another serious constraint in economic development is the higher levels of budget deficits. The poor performance of the financial sector had adversely affected development in various sectors of the economy till 2000. weak tax administration etc. The per capita income at market price is only 925 dollars per year in 2007 in Pakistan. These obstacles are now discussed in brief: 1 Economic Obstacles (1) External debt: There was a rising trend in external debt which posed a serious threat to the economic future of the country.

There is a vast regional disparity in income. . It is concentrating mainly on the export of cotton. Pakistan. Deficiency of capital is an important obstacle in the way of economic development. There are differences in the social customs. carpenters. (3) Borrowing from the banking system. (9) Low Level of Technology.(4) Persistent deficit in balance of payments. The occupational classification which is mostly village centered impede the economic development. In Pakistan. which are mainly primary commodities. is foreign trade oriented. though on the decline. One of the obstacles to economic development in Pakistan is the use of low level of technology in various sectors of the economy. We do not stress and even do not recommend that Pakistan should adopt most modern and sophisticated technology. (5) Financing the budgetary gap. habits and attitudes towards work of the people living i different provinces of the country. etc restrict occupational and geographical mobility. the proportion of dependants below the age of 15 years and above the age of has gone up to 73% which is a great burden on the meager resources of the country and a big obstacle to economic development.8% annually in Pakistan. The technology to be applied in Pakistan should be appropriate to the conditions prevailing in the country. The caste system functioning mostly in terms of occupation tailors. The population is growing at the rate of about 1. It is about 16. For instance we should preferably use cheap sources of energy. The budgetary gap is financed through three sources (i) External borrowing. carpets and manual labour leather. has also killed the sense of initiative and the incentive to work. In Pakistan. society. They are ignorant of the development taking place in their own country as well as in the world. The occurrence of dualism stand in the way of optimum utilization of factors. goldsmiths. Another important obstacle to economic development is the persistent deficit in the balance of payments over the years.1% of GDP which is hardly able to maintain current per capita level in the country. smaller plants and scale of machinery etc suitable to the local conditions. 2. The joint family system. (8) Rapidly Growing Population. The people are mostly conservative in their habits. sport goods. the rate of national saving is very low. more than 50% of the people are illiterate. Dualism is an another important obstacle to economic development in Pakistan. Oneof the serious factor distorting the fiscal system and obviously economic growth is the huge amount of borrowing to finance the budgetary gap. The excessive dependence on export of a few items has made the economy unstable and is a great obstacle to economic growth. The religious beliefs of the people condemning the accumulation of wealth. Excessive bank borrowing creates inflationary pressure in the economy. If a country is to achieve rapid rate of economic development. People lack self confidence and initiative. As a result of the rapid increase. (10) Dualistic Economy. it must save at-least 25% of GDP each year. The use of technology differs from sector to sector and region to region. (6) Deficiency of Capital. simple farm equipment. The increase in the prices of imported goods and their rising flow in the country is a big strain on the foreign exchange resources. (7) Scarcity of Foreign Exchange. rice. like other developing countries. Social and Cultural Obstacles: The socio-cultural attitudes of the people also stand in the way of economic development of our country. They feel pride in the native culture and are generally not receptive to foreign methods of production. (2) Domestic non bank borrowing.

Mixed economy. the rate of economic development can go up. incompetent and unsympathetic. If we are really desirous of increasing the rate of economic development. In designing the tax reforms. Our social taboos and customs prevent them from working and improving the standard of living. as far as possible. The history of planning show that with the exception of the Faith Five Year Plan. should be followed for financing development projects. Political and Administrative Obstacles: For accelerating the rate of economic development. It is a big challenge to the planners. The planning machinery and all others involved in administration should be loyal to the country. the planning job done by the previous government should not be altered altogether. Pakistan is knee deep in foreign debt. we shall have to lessen our dependence on foreign assistance. We should not forget here also that the adoption of socio-cultural attitudes of the West have brought down the quality of life as well. We are of the opinion that if following measures are right earnestly applied. class pride etc. Self interest is dominating over national interest which is a great barrier to economic development. it is necessary that the coverage of indirect taxes be reduced. For expanding the resource base. formulated their own strategies of development and left the claim without achieving the targets of the Plans. The practical means of setting aside the barriers to economic development are now to be stored out. ''Your duty is to do and then put the result in the hands of God. 3. The overall line of the planning machinery in Pakistan is bureaucratic rather than professional. (2) Tax on agriculture income. deaths. since its inception. The share of direct taxes has also to be increased. If there is a change in the government set up due to elections. there should be political stability in the country. People forget here that God has also said. In Pakistan. (1) Expanding the tax base. litigations. . care has to be taken to minimise burden on the common man. The strategy of self reliance. They framed their own plans.dependence upon fate and the will of God only are also obstacles to economic growth.'' The unnecessary expenditure on marriages. has reduced domestic saving and has adversely affected economic progress. (3) Self reliance. Another administrative obstacle line the way of economic development is that we have not so far been able to decide about the nature of economic system to be adopted in Pakistan. Remedial Measures for Economic Development We have discussed the major obstacles to economic development. births. The administration working in various departments is generally weak. Each government which came into power condemned the planning work done by the previous governments. The basic needs of the people remain largely unsatisfied. all other Plans have failed to achieve their targets. Socialistic economy. The government can raise more revue by brining the agriculturists income in the tax net on proper footings. About half of the population comprises women folk. or of dictatorship. We do agree here that socio-cultural factors have impeded economic progress. There should be clarity on this fundamental issue so that planning is drawn up according to the socio-economic objective of that system and a path of development laid out. They should be competent sympathetic and honest in the performance of the duties assigned to them. there are rapid changes in governments. Islamic economy all are talked about but nothing concrete has actually been practiced.

Development planning is declared a right and obligation of the planning agents. In communist countries. (7) Development of agricultural sector. railways etc. (8) Improvement of the infrastructure. The technological development will help in keeping our products and exports competitive in the world market. A great deal of improvement in the means of transport. and increased investment on education. The Government of Pakistan. foreign exchange and human resources. health and nutrition etc. it is very essential that we take effective steps in promoting science and technology. The production of improved basic agricultural implements will greatly help in raising the agricultural production.8%) is also intensifying constraint on the development of savings. can play a dominant role in increasing economic development in the country. pesticides and improved seeds are the right steps in improving agricultural production which contributes 20. (11) Promoting Technology. banking. (5) Industrialization.(4) Export led growth. (10) Stable fiscal and monetary policies. in view of the importance of agriculture in the national economy.9% of GDP and accounts for 46% of foreign exchange earnings in Pakistan. (14) Slowing the rate of population growth. There should be reduction in the administrative expenditure also. (13) Development of physical and human capital. roads. The state of uncertainty of their nationalization again be removed once for all. Expanded credit facilities. etc. having comparative advantage in production will greatly solve the problem of limited size of the domestic market. has to be made for economic development. Development of physical infrastructure. (9) Constitutional cover. For the rapid development of the economy. the strategy of export led growth should be carefully chalked out. revision of taxes etc. The professionally qualified personnel should be inducted and assigned specific targets to be achieved in the allocated sectors. High rate population growth (about 1. the fiscal and monetary measures should be carefully chalked out There should not be frequent changes after a few months in the import and export policies. The production of import substitutes at home will save the precious foreign exchange. (12) Administrative Reforms. education. In order to accelerate the rate of economic development. For economic take off. the development planning is being decentralized. The production of value added goods on large scale. provision of fertilizer. There should be far reaching administrative reforms in the country. If we want the qualities of . The system if adopted in a coordinated manner shall help in quickening the tempo of economic development in this country. roads. power. Another approach to development planning within the framework of mixed economy is to give priority to the establishment of those industries which meet the basic needs of the various sectors of the economy. The state owned industrial units which are being privatized and other private units should be given Constitutional cover. is attaching high priority to the development of this sector. (6) Strategy of self management.

the government has identified five key sectors for promoting economic growth and bringing it to the level of 8% growth rate.human life. environmental beauty in place of deterioration. we shall have to take measures to control the family size. education in place of ignorance. These sectors include (i) agriculture (ii) housing and construction (iii) small and medium enterprises (iv) information technology and (v) oil and gas sector . During the last four years. prosperity in place of poverty. health in place of illness.