Hseb Notes - Economics XI - Economic Development

Meaning of Economic Development:

            Economic development is a changing concept. Therefore, there is no accurate and universally acceptable definition of economic development. In past, the increase in gross national product (GNP) was regarded as the main indicator of economic development. But there is change in this view in recent years.

            According to Gunar Mydral: “Economic development means upward movement of the entire social system.”

            According to Arthur Lewis: “Economic development means the increase in per capita production.”

            According to World Bank: “Economic development is defined as a sustainable increase in living standard that encompasses material consumption, education, health and environmental protection.”

            Therefore, Economic development means not only increase in per capita income but it also means the alleviation of poverty, reduction in economic inequality and provision of social services like education, health and environmental protection.

Indicators of Economic development:

            There is difference of opinions among the economists regarding the indicators of economic development. Economic development is the result of long term changes. The commonly known indicators of economic development are as follows:

I.                   Increase in per capita income:

Per capita income is the first and most important indicator of economic development. Therefore, per capita income should be increased for the economic development of nation.

II.                Increase in standard of living:

Another indicator of economic development is living standard of common people. Thus, standard of living of common people should increase for economic development because the main objective of economic development is to provide better life to people.

III.             Physical Quality of Life Index(PQLI):

This is another indicator of economic development. The physical quality of life index (PQLI) is the composite of three indexes like life expectancy, literacy and infant mortality rate. The value of PQLI ranges from 1 to 100. If the value of PQLI is more than 50, the country is supposed to be developed and if the value is less than 50, the country is supposed to be developing.

IV.             Basic Needs Criterion:

This criterion was developed by Word Bank. According to this criterion the economic development is evaluated on the basis of the fulfillment of basic needs of population. Here, the basic needs of people are education, health care facility, sanitation, drinking water, nutrition, housing and other related infrastructures.

V.                Human Development Index(HDI):

This is the most recent indicator of economic development. This indicator was introduced by UNDP. It measures the development in terms of people’s income level, health, education, environment and gender issues. It is a composite index ranges 0 to 1. If the value HDI is less than 0.5, it indicates low human development and if it is more than 0.5, it indicates high human development.