Economic growth and development represent different aspects of a country's economic progress and well-being. Economic growth primarily focuses on the quantitative expansion of an economy, while economic development is a broader concept, encompassing improvements in the overall well-being and quality of life of a country's population.
Economic growth and development are commonly misunderstood terms and are often used interchangeably. Both economic policies strive to achieve the financial well-being of a nation. Developed countries are concerned with maintaining and surpassing their achievements and continuing to improve their balances of growth and development indicators. On the other hand, non-developed countries have made them an essential part of the utopia or dream to achieve. This article will explain the difference between economic growth and economic development.
Must Read – What is Finance?
Table of Content
- Difference Between Economic Growth and Development
- What Is Economic Growth?
- What Is Economic Development?
Also read: Difference Between Economy and Economics
Difference Between Economic Growth and Development
- Economic growth: An increase in actual national income/national output.
- Economic development: An improvement in quality of life and standard of living.
|Economic Growth||Economic Development|
|Definition||Economic growth is a positive quantitative change
in a country’s actual output per capita income.
|Economic Development is the improvement in
quality of life and standard of living.
|Indicators||Growth in metrics like GDP, GNP, FDI, FII, etc.||Better Human Development Index (HDI),
Human Poverty Index (HPI),
Gender Development Index (GDI),
Balance of trade,
Physical Quality of Life Index (PQLI), etc.
|Applicability||Developed nations||Developing nations|
|Government Aid||No government support or intervention is required
since it is an automatic process.
|Highly dependent on government aid since it
includes widespread policy changes.
|Wealth Distribution||Economic growth does not refer to fair and equal
distribution of wealth among the people.
|Economic development focuses on the equal
distribution of wealth among the people
and uplifts the less privileged.
|Focus||Production of goods and services.||Distribution of resources.|
What Is Economic Growth?
Economic growth is an economy’s capacity to produce more goods and services. It can be expressed as expanding the economy’s production possibilities, which means the economy can produce more, and its production possibilities frontier (PPF) moves upwards.
The Inter-American Development Bank defines it as follows: Economic growth is the increase in product and income per person in the long term. Growth is how an economy (national, regional, or world economy) becomes richer.
Must Explore – Finance Courses
Economic growth is a narrow term. It involves an increase in output in quantitative terms. Still, economic development includes changes in qualitative terms such as social attitudes and customs and quantitative growth of output or national income.
What Is Economic Development?
Economic development can be generically defined as sustainable growth from three points of view: social, cultural, political, and economic changes that contribute to material progress. Economic development is a sustained improvement in the material well-being of society. It is a broader concept than economic growth. It contains changes in resource supplies, the rate of capital formation, the population’s size and composition, technology, skills, efficiency, and institutional and organizational set-up.
These changes fulfil the broader objectives of ensuring more equitable income distribution, significant employment, and poverty alleviation.
To summarize, economic development is a process that constitutes a long chain of interrelated changes in fundamental supply factors and demands that overall lead to growth in the net national product of a country in the long term.
Economic growth, measured by real GDP, helps address socio-economic issues and improve living standards. However, it must be balanced with responsible environmental policies to prevent resource depletion. Economic development, aiming at citizen welfare, considers broader factors like life expectancy and literacy. Both growth and development are vital for a nation’s progress, ensuring prosperity and the well-being of its people. Striking this balance is key to sustainable and inclusive growth.
Is economic growth the same as an increase in GDP?
Economic growth is often associated with increased GDP, representing the value of all goods and services produced in an economy. However, economic growth alone does not provide insights into other social, environmental, or distributional aspects of development.
What factors contribute to economic growth?
Economic growth is influenced by factors such as investments in physical and human capital, technological advancements, improvements in productivity, trade and exports, and favorable government policies that promote economic activity.
Does economic development only focus on the economic aspects of a society?
No, economic development encompasses a broader social, environmental, and institutional perspective. It considers aspects such as poverty alleviation, access to education and healthcare, environmental sustainability, and good governance.
Is economic growth more important than economic development?
Both economic growth and economic development are important, but they serve different purposes. Economic growth focuses on increasing the size of the economy, while economic development aims to improve the overall well-being and quality of life for individuals within the society.
Can economic development be achieved without economic growth?
Yes, economic development can be achieved without substantial economic growth. It is possible to prioritize social and environmental improvements, equitable distribution of resources, and sustainable practices, even without significant economic expansion.
Do economic growth and economic development always occur simultaneously?
Economic growth and economic development can occur simultaneously but are not necessarily interdependent. It is possible for a country to experience economic growth without achieving comprehensive development and vice versa.
Download this article as PDF to read offlineDownload as PDF