Economic growth and economic development are two words which are usually mixed by the people and more often used interchangeably. However, these two topics of economics are far different from each other and have contrasting meaning. in addition to this, parameters to calculate them is also different.
In this article, you will learn about economic growth and economic development and the key differences between both of them.
What is Economic growth?
Economic growth refers to the rise in the production of goods and services over a specific period of time. When there is economic growth the profits of business increases, consequently the price of stocks also improves. In this way, companies get more capital to invest more and hire more employees. therefore, because of the increase in the number of jobs income of the citizens of a nation rises. As a result, consumers have more money to spend to buy goods and services. Therefore, economic growth is crucial for all countries.
Economic growth is measured using the Gross Domestic Product (GDP). Because GDP considers the country’s total economic output. It takes into accounts all goods and services produced in a country for sale purpose and there is no difference whether products are sold within the country or outside the country. economic growth is measured quarterly in most of countries. However, the World bank uses Gross National Income (GNI) at the place of Gross Domestic Product (GDP) to measure overall growth. It also includes the income sent back home by the citizens who are working outside their home country. In countries like Mexico, income sent by citizens working overseas is the main source of income.
Economic growth is measured by finding out at what stage the economy is in. the economy is considered good when it is in the expansion phase. In an expansion phase, an economy grows in a sustainable fashion.
What is Economic Development?
Economic development is the most important concern of a nation, state, and even local governments and they make sure this by the support of innovation and new ideas, creation of more jobs, higher wealth, and creation of overall quality life of citizens. You are most likely to help your nation in economic development when you buy something in a store and when you pay local or state taxes.
Everything from a meal to a car that you buy has a portion that is dedicated to the economic development projects and initiatives. Economic development is defined on the basis of the projects completed and accomplishment of plans of development such as building or improving infrastructure like bridges and roads, improvement in the education system of the nation by opening new schools and universities or by improvement in the teaching aids; open new business stores in the community, ensuring the safety of the citizens of the nation.
Economic development of a nation can be categorized in three broad areas, such as
a) Agendas that are made to provide services and infrastructure like community parks, better and bigger roads, new hospitals, public library, sports grounds, swimming pools, new schools and college facilities and programs, crime prevention initiatives, and health facilities etc.
b) Important and big economic objectives like the growth of an economy and creating new jobs. To accomplish these initiatives written laws, tax collection, tax incentives, and industry regulations are required.
c) Creating more jobs is most important for the development of an economy. Therefore, to make sure more jobs and business retention government need to start workforce development programs to help its citizens to get the required education and skills. in addition to this, small business development programs are needed to start to help entrepreneurs get enough finances so that they can start good business in collaboration with other small businesses.
In the end, how can one measure if the development is happening or not? There are a thousand ways through which we can measure economic development. The simplest way to measure economic development is the increase in average income of a household, leisure time, better life expectancy, unemployment rate in the nation, the literacy rate of children, standardized testing of adults, and better health facilities.
Difference between Economic growth and Economic development
|Economic Growth||Economic Development|
|Economic growth is the quantitative variation in the output of an economy at a specific time period.||Economic development is growth in the output of an economy along with the development in HDI index which considers living standards of citizens, overall happiness index, and advancement in technology of an economy.|
|It is a “constricted” concept.||It is a “Wider” concept.|
|It is quantitative in nature.||It is qualitative in nature.|
|Economic growth is an upsurge in parameters such as GNP, GDP, FII, and FDI etc.||Economic Development is an upsurge in Improvement in literacy rate, life expectancy rate, poverty rate, and infant mortality rate etc.|
|Economic growth is measured for “short-term”.||Economic development is measured for “long-term”.|
|Economic growth is applicable in developed nations.||Economic development is applicable to developing nations.|
|A Measurement technique for economic growth is the increase in national income.||“per capita income” the real national income is a measurement technique for economic development.|
|Economic growth occurs at a specific period of time.||Economic development is a continuous process.|
|Economic growth is an automatic process. therefore, it does not require government intervention.||Economic development is not an automatic process and it is highly dependent on the intervention of government as it requires frequent policies change, which is not at all possible without the intervention of the government of a nation.|
|Economic growth does not get affected by how wealth is distributed among the citizens of a country.||Economic development concerns about how the wealth is distributed among the citizens of a nation and it is mainly concerned with the upliftment of the downgrade societies of a nation.|
In this article, you have learned about economic growth and economic development and also learned how different both are from each other and 10 key differences between both of them.