Economic Growth refers to the rise in the value of everything produced in the economy. It implies the yearly increase in the country’s GDP or GNP, in percentage terms. It alludes to a considerable rise in the per-capita national product, over a period, i.e. the growth rate of increase in total output, must be greater than the population growth rate.
Economic Growth is often contrasted with Economic Development, which is defined as the increase in the economic wealth of a country or a particular area, for the welfare of its residents. Here, you should know that economic growth is an essential but not the only condition for economic development.
The economic trend in a country as a whole is the major component of its business environment. An economy whose growth rate is high provides a promising business prospect and thus builds business confidence. In this post, you will find all the substantial differences between these two.
Content: Economic Growth Vs Economic Development
|Basis for Comparison||Economic Growth||Economic Development|
|Meaning||Economic Growth is the positive change in the real output of the country in a particular span of time.||Economic Development involves rise in the level of production in an economy along with the advancement of technology, improvement in living standards and so on.|
|Scope||Increase in the indicators like GDP, per capita income etc.||Improvement in life expectancy rate, infant mortality rate, literacy rate and poverty rates.|
|Term||Short term process||Long term process|
|Applicable to||Developed Economies||Developing Economies|
|How it can be measured?||Upward movement in national income.||Upward movement in real national income.|
|Which kind of changes are expected?||Quantitative changes||Qualitative and quantitative changes|
|Type of process||Automatic||Manual|
|When it arises?||In a certain period of time.||Continuous process.|
Definition of Economic Growth
Economic Growth is defined as the rise in the money value of goods and services produced by all the sectors of the economy per head during a particular period. It is a quantitative measure that shows the increase in the number of commercial transactions in an economy.
Economic growth can be expressed in terms of gross domestic product (GDP) and gross national product (GNP), which helps in measuring the size of the economy. It lets us compare in absolute and percentage change, i.e. how much an economy has progressed since last year. It is an outcome of the increase in the quality and quantity of resources and advancement of technology.
Definition of Economic Development
Economic Development is defined as the process of increase in volume of production along with the improvement in technology, a rise in the level of living, institutional changes, etc. In short, it is the progress in the socio-economic structure of the economy.
Human Development Index (HDI) is the appropriate tool to gauge the development in the economy. Based on the development, the HDI statistics rank countries. It considers the overall development in an economy regarding the standard of living, GDP, living conditions, technological advancement, improvement in self-esteem needs, the creation of opportunities, per capita income, infrastructural and industrial development, and much more.
Key Differences Between Economic Growth and Economic Development
The fundamental differences between economic growth and development are explained in the points given below:
- Economic growth is the positive change in the real output of the country in a particular span of time economy. Economic Development involves a rise in the level of production in an economy along with the advancement of technology, improvement in living standards, and so on.
- Economic growth is one of the features of economic development.
- Economic growth is an automatic process. Unlike economic development, which is the outcome of planned and result-oriented activities.
- Economic growth enables an increase in the indicators like GDP, per capita income, etc. On the other hand, economic development enables improvement in the life expectancy rate, infant mortality rate, literacy rate, and poverty rates.
- Economic growth can be measured when there is a positive change in the national income, whereas economic development can be seen when there is an increase in real national income.
- Economic growth is a short-term process that takes into account the yearly growth of the economy. But if we talk about economic development it is a long-term process.
- Economic Growth applies to developed economies to gauge the quality of life, but as it is an essential condition for development, it applies to developing countries also. In contrast, economic development applies to developing countries to measure progress.
- Economic Growth results in quantitative changes, but economic development brings both quantitative and qualitative changes.
- Economic growth can be measured in a particular period. As opposed to economic development is a continuous process so that it can be seen in the long run.
Video: Economic Growth Vs Economic Development
To understand the two terms, we will take an example of a human being. The term growth of human beings simply means the increase in their height and weight which is purely physical. But if you talk about human development, it will take into account both the physical and abstract aspects like maturity level, attitudes, habits, behaviour, feelings, intelligence, and so on.
In the like manner, growth of an economy can be measured through the increase in its size in the current year in comparison to previous years, but economic development includes not only physical but also non-physical aspects that can only be experienced like improvement in the lifestyle of the inhabitants, increase in individual income, improvement in technology and infrastructure, etc.
After the above discussion, we can say that economic development is a much bigger concept than economic growth. In other words, the economic development includes economic growth. As the former uses various indicators to judge the progress in an economy as a whole, the latter uses only specific indicators like gross domestic product, individual income etc.