LESSON 1 – ECONOMICS
DEVELOPMENT
Meaning of Development
Individual perspective
• Development has many aspects. It is a comprehensive term which involves
development of political, social and economic life of the people. Different
persons have different notions because each of them seeks different things.
• They seek things that are most important for them, i.e., which can fulfil their
aspirations or desires. Different people have different goals because they are
different and they are leading their life in different situation but their general
goal is progress.
• There are two things (a) Different persons can have different development
goals. (b) What may be development for one may not be development for
other. It may even be destructive for other.
• Hence, Development is a complex issue as development means different things
to different people.
• INCOME AND OTHER GOALS:
➢ Income is considered the most important component of development as it can
buy material goods and services.
➢ What people desire are regular work, better wages and decent price for their
crops or other products that they produce. In other words, they want more
income.
➢ But, at the same time people also seek things like equal treatment, freedom,
security, and respect for others.
➢ In some cases, these may be more important than more income or more
consumption because material goods are not all that you need to live.
➢ There are many things that are not easily measured but they mean a lot to our
lives. These are often ignored.
➢ However, it would be wrong to conclude that what cannot be measured is not
important.
➢ Similarly, for development people look at a mix of goals. The developmental
goals that people have are not only about better income but also about other
important things in life.
National Development
• Development of a nation applies to all round development of a country. Such
as freedom, economic equality, security, life with dignity and good standard of
living.
• Different persons could have different as well as conflicting notions of a
country’s development. National development means thinking about fair and
just path for all, whether there is a better way of doing things.
• CHANGES IN THE TRADITIONAL NOTION OF DEVELOPMENT:
➢ The increase in income is not sufficient for a nation. Income can be a major
base of economic growth of a nation. But experiences had shown that
economic growth could not automatically get translated into the improvement
of levels of living of the poor masses. Therefore, economists redefined the
concept of economic development in terms of the reduction of poverty,
unemployment and inequality in the context of a growing economy.
➢ Now-a-days redistribution and growth have become the popular slogan in
most of the progressive nations, including India. The concept of economic
growth is related to the increase in output of goods and services in an
economy. This can be expressed in two ways: (i) increase in total output or
increase in gross domestic product (GDP): and (ii) rise in per capita income or
rise in per capita GDP.
➢ Economic development is a broader concept than economic growth.
Development concerns not only man's material needs but also the
improvement of social conditions of life. It is, therefore, not only economic
growth but growth plus change in social, cultural and institutional pattern. It
includes both growth aspect and distribution aspect. Development must,
therefore, be conceived of as a multidimensional concept.
COMPARING DEVELOPMENT ACROSS COUNTRIES
• Usually, we take one or more important characteristics of persons and compare
them based on these characteristics.
• For comparing countries, their income is considered to be one of the most
important attributes. Countries with higher income are more developed than
others with less income.
• The income of the country is the income of all the residents of the country.
This gives us the total income of the country.
• For comparison between countries, total income is not such useful measure.
Because they have different populations and comparing total income will not
state the average amount earned by a person. Hence, we compare the average
income which is the total income of the country divided by its total population.
The average income is also called per capita income.
• "WHILE AVERAGES ARE USEFUL FOR COMPARISON, THEY ALSO HIDE
DISPARITIES:
Let us consider two countries, A and B. For the sake of simplicity, we have
assumed that they have only five citizens each.
Will you be equally happy to live in both these countries?
Are both equally developed?
Perhaps some of us may like to live in country B if we are assured of being
its fifth citizen but if it is a lottery that decides our citizenship number then
perhaps most of us will prefer to live in country A. Even though both the
countries have identical average income, country A is preferred because it
has more equitable distribution. In this country people are neither very rich
nor extremely poor. On the other hand most citizens in country B are poor
and one person is extremely rich. Hence, while average income is useful for
comparison it does not tell us how this income is distributed among people.
CRITERIA FOR COMPARING COUNTRIES
Per Capita Income – World Development Report
2013 data
• In World Development Report brought out by the World Bank, countries with
per capita income of
➢ US$ 12,736 per annum and above - rich countries
➢ US$ 1,570 or less - low-income countries.
➢ India came in the category of low middle-income countries because its
per capita income was just US$1570 per income
2023 data
• In World Development Report brought out by the World Bank, countries with
per capita income of
➢ US$ 63,400 per annum and above - high income or rich countries
➢ US$ 2400 or less are called low-income countries.
➢ India comes in the category of low middle income countries because its
per capita income was just about US$ 10,030 per annum.
The rich countries, excluding countries of Middle East and certain other small
countries, are generally called developed countries.
SHOULD COUNTRIES / STATES ONLY BE COMPARED ON THE BASIS OF PER
CAPITAL INCOME?
Analyse the table of Per capita income between three states, Haryana, Kerala and
Bihar (Table 1.3) and other criteria (Table 1.4)
Conclusion from the analysis
• Money in your pocket cannot buy all the goods and services that you may need
to live well.
• Income by itself is not a completely adequate indicator of material goods and
services that citizens are able to use.
• Normally, your money cannot buy the pollution-free environment or ensure
that you get unadulterated medicines unless you can afford to shift to a
community that already has all these things.
• Money may also not be able to protect you from infectious disease unless the
whole of your community takes preventive steps.
• Economic development is a broader concept. It is economic growth plus
something more than economic growth. The basic ideas in economic
development are rise in productivity, decline in unemployment, poverty and
inequality from high levels. Eg: Public Distribution System is an example of
government’s role in ensuring economic development.
ECONOMIC DEVELOPMENT – A BIGGER PICTURE IN TODAY’S TIMES
HUMAN DEVELOPMENT
• Economic development alone cannot promote human development. Human
development is the process of both quantitative change and qualitative
growth.
• Human Development means Development of an individual in such a way that
he is able to earn and fulfil his materialistic desire. The United Nations
Development Programme (UNDP), in its first Human Development Report,
1990 introduces the concept of Human Development Index (HDl).
• HDI is a cumulative measurement of :
➢ Living standard (Per capita Income) - Decent Standard of living is a choice to
enjoy a quality and standard life. It is measured by national income or income
per capita in Purchasing Power Parity in US dollar (PPP, US $).
➢ Health Status (life Expectancy) - Longevity is a choice to live a long and
healthy life. It is measured in terms of life expectancy (years).
➢ Educational levels of the people (Literacy rate and Enrolment ratio)
• Human development is the core of United Nations Development Programme
(UNDP), which presents it into a new perspective of political and economic
freedom and deepening of democracy at global level, which is economically
productive and socially and environmentally sound.
• The rank of, a country is determined by the overall achievements in these three
basic dimensions of human development. HD ranks countries in relation to
each other to tell them how far a country has travelled, and how far it has yet
to travel the path of development. In this way HDI is indicative to the levels of
human development and not the complete measurement of development.
Economic development can be measured and income is the most common method for
measuring development. However, the income method, though useful, has several
weaknesses. Hence, we need newer ways of looking at development using indicators
of quality of life and environmental sustainability.
SUSTAINABILITY OF DEVELOPMENT
• The concept of sustainability of development has gained momentum due to
environmental concerns and the rate of resource depletion
• Ground water is an example of renewable resource but the rate at which we
are using then it may not be replenished by rain water.
• Sustainability of development means that development should
take place at the same time environment should be conserved
from degradation.
• Sustainability of development also means that needs of the
present generation should not be compromised and at the
same time resource should be conserved for coming generation.
• Non renewable resources are those resources which will get exhausted after
years of use. So we have to use them Judiciously.
• The consequences of environmental degradation do not respect national or
state boundaries and is no longer region or nation specific.
• Sustainability of development is a new area of knowledge in which scientists,
economists, Philosophers and other social scientists are working together.
KEY TERMS
• Developed Economies: These are those economies which are characterized by
high level of per capita income and high standard of living
• Developing Economies: Those economies which are passing through the stages
of growth and development. In such economies significance of agriculture
tends to decline whereas the industrial sector grows sharply. e.g. India,
Indonesia
• Economy: It is a sum total of all the economics activities like production,
consumption, distribution exchange etc.
• National Income: It is the total value of all the goods and services produced
within a country plus net income from abroad during a year.
• Public Distribution System : A food security system established by the
government of India to provide essential items at subsidised rate. Eg: rice,
wheat, sugar etc.
• Production: When an activity results in valuable and useful things it is called
production.
• Per capita Income: It is the average income of the people of country in a
definite period. is calculated in dollars for all countries so that it can be
compared.
• Under-Developed Economies: These are the economies which are
characterized by low level of per capita income and miserable standard of
living. Such economies are not able to exploit their natural resources. e.g.
Nepal, Burma etc.
• Infant Mortality Rate or IMR: Indicates the number of children that die before
the age of one year as a proportion of 1000 live children born in that particular
year.
• Literacy Rate: Measures the proportion of literate population in the 7 and
above age group.
• Net Attendance Ratio: Is the total number of children of age group of 15-17
years attending school as a percentage of total number of children in the same
age group.
• Life Expectancy at birth denotes, average expected length of life of a person at
the time of birth.
