Economic Growth and Development - Ch03

Economic Growth

Related to continuous increase in Gross Domestic Product (GDP), Gross National Product (GNP), and Per Capita Income (PCI)
Related to quantitative change
Most appropriate measure of economic growth: Real Per Capita Income

Per Capita Income = National Income ÷ Total Population

Economic Development

Efficient utilization of all factors of production
With continuous and long-term growth in national income and per capita income, there is improvement in people's standard of living
Related to both quantitative and qualitative change
Depends on Natural Resources, Capital Formation, and Size of Market

Prof. Amartya Sen's DefinitionEmpowerment and expansion of capabilities

Amartya Sen — Nobel Prize1998

Environment Kuznets Curve: Shows the relationship between environmental quality and economic development (Per Capita Income).

⚡ QUICK RECALL

Growth = quantitative only; Development = quantitative + qualitative — the single biggest exam distinction in this topic.

Measurement of Economic Development

Human Development Index (HDI)
Basic Needs Approach — propounded by World Bank
Physical Quality of Life Index (PQLI)
Net Economic Welfare (NEW)
Purchasing Power Parity Method (PPP)

Human Development Index (HDI)

Propounded1990, by Mahbub ul Haq, Amartya Sen, and others

Related ToUnited Nations Development Programme (UNDP)

Published Since1990, by UNDP

IndicatorsLife Expectancy at Birth, Education, Per Capita Income

Score ScaleMax: 1, Min: 0

130India's HDI Rank (2025), out of 193

Iceland topped the HDI Report (2025), while South Sudan ranked last.

⚠ EXAM TRAP

Don't confuse HDI's score scale (0 to 1) with PQLI's scale (1 to 100) — a very common mix-up in options.

Physical Quality of Life Index (PQLI)

Propounded ByMorris D. Morris

Score ScaleMax: 100, Min: 1

Indicators

Life expectancy at age one
Infant Mortality Rate
Basic Literacy Rate

⚡ QUICK RECALL

First state to publish HDI in India: Madhya Pradesh (1995) — a Bihar-relevant BPSC comparison fact.

Net Economic Welfare (NEW)

Modified form of MEW (Measure of Economic Welfare)
Propounded by: Samuelson

ISEW (Index of Sustainable Economic Well-being)First issued by Daly and Cobb (1989)

Purchasing Power Parity Method (PPP)

Currently used by the World Bank
Used for comparative analysis of standard of living across countries

Gross National Happiness (GNH)

Coined By4th King of Bhutan, Jigme Singye Wangchuck

Decade1970s

33Indicators

9Domains

The concept implies that sustainable development should take a holistic approach towards national progress, giving equal importance to non-economic aspects of well-being and happiness.

⚡ QUICK RECALL

GNH = Bhutan's original contribution to development economics — 33 indicators across 9 domains, prioritizing happiness over pure GDP.

Economic Development vs Economic Growth

Economic Development	Economic Growth
Qualitative Concept	Quantitative Concept
Along with increase in production, technological and institutional changes are also important	A steady process; does not involve any kind of innovation
Requires structural transformation	Structural change already completed; only production can be increased
Result of creative forces generated through proper control, direction, and guidance	Outcome of planned processes
Involves social, cultural, economic, qualitative, and quantitative changes	Related only to the increase in production

⚠ EXAM TRAP

Growth is a subset within Development — every instance of development involves some growth, but growth alone (without qualitative change) does not amount to development.

Quick Reference Summary

Topic	Key Fact
Economic Growth	Continuous increase in GDP, GNP, PCI; Quantitative change
Per Capita Income Formula	National Income ÷ Total Population
Most Appropriate Measure of Growth	Real Per Capita Income
Economic Development	Qualitative + Quantitative change; efficient utilization of production factors
Amartya Sen on Development	Empowerment and expansion of capabilities; Nobel Prize 1998
Environment Kuznets Curve	Shows relationship between environmental quality and per capita income
HDI Propounded	1990 by Mahbub ul Haq, Amartya Sen; Published by UNDP
HDI Indicators	Life Expectancy, Education, Per Capita Income
HDI Score Range	Max 1, Min 0
India's HDI Rank (2025)	130 out of 193 countries
HDI Topper (2025)	Iceland
HDI Bottom (2025)	South Sudan
First State to Publish HDI in India	Madhya Pradesh (1995)
PQLI Propounded by	Morris D. Morris; Scale: Max 100, Min 1
PQLI Indicators	Life expectancy at age one, Infant Mortality Rate, Basic Literacy Rate
NEW	Net Economic Welfare; Propounded by Samuelson; Modified form of MEW
ISEW	Index of Sustainable Economic Well-being; first issued by Daly and Cobb (1989)
PPP	Used by World Bank; comparative living standard analysis
GNH	Coined by 4th King of Bhutan, Jigme Singye Wangchuck, 1970s; 33 indicators, 9 domains