Economic Growth and Development

Economic growth is the increase in the national income of a country. The increased production of goods and services leads to economic growth. In short, economic growth is the increase in the output of a country compared to the previous year. When economic growth is achieved, industrial production, agricultural production, and purchasing power increase, and the service sector grows. The economic growth rate is the rate of increase in national income in the current year compared to the previous year. Economic development occurs when the country achieves economic growth and the standard of living of all its people also increases.

Development Indices

On the basis of economic development, countries are classified as developed countries and developing countries. There are some generally accepted indices to measure and evaluate economic development. They are called development indices. The important development indices are given below.

■ Per capita income

■ Human Development Index (HDI)

■ Physical Quality of Life Index (PQLI)

■ Human Poverty Index (HPI)

■ Human Happiness Index (HHI)

1. Per capita income

Per capita income is the simplest index of development indices. Per capita income is a traditional development index. Per capita income is the average income of one person in a country in a year.

National income per capita = National income / Population

National income per capita is obtained by dividing national income by the country's population. Per capita income helps to compare countries and understand the economic status of countries. The per capita income index is obtained by dividing the growth rate of national income by the population growth rate. The per capita income index helps to determine whether a country has achieved economic growth in the current year compared to the previous year. Per capita income increases only if the growth rate of national income is higher than the population growth rate.

2. Human Development Index

The Human Development Index (HDI) is a measure of the overall progress of a person in relation to the economy of a country. The HDI was developed by economists Mehboob-ul-Haq and Amartya Sen. The United Nations Development Program (UNDP) prepares the Human Development Report based on the HDI. The Human Development Report was first released in 1990. Since then, the UNDP has been publishing the Human Development Report every year. Pakistani economist Mehboob-ul-Haq is known as the father of the 'Human Development Report'. The main human development indicators used to prepare the Human Development Report are life expectancy, education level (literacy and gross school enrolment rate), and standard of living (per capita income). The Human Development Index categorizes a country as developed, developing, or underdeveloped. Improved educational facilities, a better health care system, and more training are factors that enable human development. The Human Development Index value is recorded between zero and one. Based on the value of the index, countries of the world can be divided into four categories. Very high human development from 0.8 to 1.0, high human development from 0.7 to 0.799, medium human development from 0.550 to 0.699, and low human development below 0.550. The value zero indicates no development and one is the highest development.

3. Physical Quality of Life Index

The Physical Quality of Life Index (PQLI) is a better index than the per capita income index. The PQLI came into use in 1979. The PQLI was developed by Morris David Morris. The main factors indicated by the PQLI are life expectancy, infant mortality rate, and basic literacy.

4. Human Poverty Index

The Human Poverty Index (HPI) is an index developed by the United Nations to complement the Human Development Index. The criteria considered for preparing the HPI are a long and healthy life, knowledge, and quality of life. The first report of the Human Poverty Index was published in 1997.

5. Human Happiness Index

The Human Happiness Index was developed for Bhutan. The nine indicators considered to calculate the Human Happiness Index are health, quality of life, nature and biodiversity protection, social life and neighborliness, corruption-free governance, cultural diversity, education, effective use of time, and mental health.