Economic
Growth &
Development
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Economic Growth
• It is an increase in the level of output
of goods and services that is sustained
over a long period of time, measured
in terms of value added.
• Economic growth theory typically
refers to growth of potential output
i.e. production at full employment.
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Commodity
Market
Economic
Factor Market
Growth
Structural Shift
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Importance of Economic Growth
• Poverty alleviation
• Wider availability for human choices and
economic activities
• Resolves social issues
• Improves standard of living
• Better technology
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Factor Affecting Economic Growth
Capital Formation (Investment)
Capital-Output Ratio
Occupational Structure
Technological Progress
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Limitations
Income Inequality
Pollution
Loss of Non-Renewable Resources
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Economic Development
Economic development refers to a
sustained, long-term increase in the
economic well-being, standard of living,
and overall prosperity of a country or
region. It is a broader concept and
includes Economic Growth as well
because without economic growth,
economic development cannot happen.
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Traditional Approach
Modern Approach
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Economic Development & Structural Changes
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Developed v/s Developing
• World Bank’s World Development Report categorizes economies in three
categories on the basis of income, which are high income, middle income and
low income economies.
• Usually, high income countries are known as developed/advanced economies
while low income countries are known as underdeveloped economies.
• Developed or advanced economies are also characterized by high standard of
living, universal and quality education, better health care facilities and high life
expectancy.
• Economists also use the terms, first world, second world and third world for the
developed, socialist, industrialist countries and underdeveloped economies
respectively.
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Income Based Classification by WB
Category Per Capita Income
Low Income $1,135 or less in 2022
Low Middle Income $1,136 and $4,465
Upper Middle Income $4,466 and $13,845
High Income $13,846 or more
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Characteristics of Developing Countries
• Low GNP Per Capita
• Technological Backwardness
• Scarcity of Capital
• High Levels of Unemployment
• Rapid population growth and high
• Low Human Wellbeing
dependency burden
• Wide Income Inequality
• Low Levels of Productivity
• High Poverty
• Agrarian Economy
• Low Participation in Foreign Trade