7.1. Economic Growth versus Development

Traditionally, economic growth is treated as a measure of improvement in quality of lives of the citizens of a country. Economic growth per se is calculated in the form of growth in GDP year over year. However, the achievement of high growth – even high levels of sustainable growth – must ultimately be judged in terms of the impact of that economic growth on the lives and freedoms of the people. It must be noted that the economic growth in several countries has not transformed into better quality of lives for the people.

Let us take the example of India. India has witnessed rapid economic growth in last two decades. Over this period of rapid growth, while some people, particularly among the privileged classes, have done very well, many more continue to lead unnecessarily deprived and precarious lives. It is not that their living conditions have not improved at all, but the pace of improvement has been very slow for the bulk of the people, and for some there has been remarkably little change. While India has climbed rapidly up the ladder of economic growth rates, it has fallen relatively behind in the scale of social indicators of living standards, even compared with many countries India has been overtaking in terms of economic growth.

For example, over the last two decades India has expanded its lead over Bangladesh in terms of average income (it is now about twice as rich in income per capita as Bangladesh), and yet in terms of many typical indicators of living standards (other than income per head), Bangladesh not only does better than India, it has a considerable lead over it (just as India had, two decades ago, a substantial lead over Bangladesh in the same indicators).

Another typical example is that of the Gulf Countries, which have witnessed rapid economic growth but they have done rather poorly on development indicators.

Therefore, several economists today define economic development differently from what the world meant by economic growth. For economists, development indicates the quality of life in the economy which might be seen in accordance with the availability of so many variables such as:

♤ The level of nutrition.

♤ The expansion and the reach of healthcare facilities—hospitals, medicines, safe drinking water, vaccination, sanitation, etc.

♤ Education levels

From the above discussion it is clear that today, economists believe that higher economic growth may not necessarily transform into higher economic development. But at the same time economic growth and development go hand in hand and one cannot survive without the other.

When we use the term growth we mean numerical increase in some parameters and when we use the term development we mean numerical as well as qualitative progress. If economic growth is properly used for development, it results in accelerating the growth and ultimately in greater population coming under the arena of development. Similarly, high growth with low

development and ill-cared development finally results into fall in growth. Thus, there is a circular relationship between growth and development.