What is Economic development?
Economic developmentis a process through which the overall education, well-being, health, income and living standards of the general population improves. This is where the economy will gradually grow, change and become advanced.
Economic development is the priority of local, state and federal government as it will lead towards an upgrading in innovation and new ideas, higher literacy rates, creation of jobs, improved environment, creation of higher wealth, labor support and better quality of life.
Development economic is the study of economic development.
Difference between Economic development and Economic Growth:
Economic Growth: Economic Growth is all about expanding the size of the economy bigger.
Here GDP is the sum of all economic activity in a nation over a specific period.
Economic Development look into how the citizens are affected in a country.Apart from the living standards it also look into the freedom to enjoy their living standards.
Here GDP is divided by the total population.
Important perspectives in Economic development are:
*Average life expectancy
*Availability of houses for living and their quality
*Health care.It also includes the number of doctors available and the affordable medicines for their treatments.
*Income per capita
Economic growth is a crucial condition for development. However, just growth is not enough because it cannot guarantee development.
Amartya Kumar Sen, an Indian economist and philosopher, who received the Nobel Memorial Prize in Economic Sciences, once said:
“Economic development is about creating freedom for people and removing obstacles to greater freedom. Greater freedom enables people to choose their own destiny.”
“Obstacles to freedom, and hence to development, include poverty, lack of economic opportunities, corruption, poor governance, lack of education and lack of health.”
Policies of Economic development:
It can be encompass into three major cases:
• Governments undertaking to meet broad economic objectives such as price stability, high employment, and sustainable growth. Such efforts include monetary and fiscal policies, regulation of financial institutions, trade, and tax policies.
• Programs that provide infrastructure and services such as highways, parks, affordable housing, crime prevention, and K–12 education.
• Job creation and retention through specific efforts in business finance, marketing, neighborhood development, workforce development, small business development, business retention and expansion, technology transfer, and real estate development. This third category is a primary focus of economic development professionals.
Contractionary monetary policy is a tool used by central banks to slow down a country’s economic growth. An example would be raising interest rates to decrease lending. In the United States, the use of contractionary monetary policy has increased women’s unemployment.
One growing understanding in economic development is the promotion of regional clusters and a thriving metropolitan economy.
International trade and exchange rates are a key issue in economic development. Currencies are often either under-valued or over-valued, resulting in trade surpluses or deficits. Furthermore, the growth of globalization has linked economic development with trends on international trade and participation in global value chains (GVCs) and international financial markets. The last financial crisis had a huge effect on economies in developing countries. Economist Jayati Ghosh states that it is necessary to make financial markets in developing countries more resilient by providing a variety of financial institutions. This could also add to financial security for small-scale producers .
Organisations of Economic Development:
Economic development has evolved into a professional industry of highly specialized practitioners. The practitioners have two key roles: one is to provide leadership in policy-making, and the other is to administer policy, programs, and projects. Economic development practitioners generally work in public offices on the state, regional, or municipal level, or in public–private partnerships organizations that may be partially funded by local, regional, state, or federal tax money. There are numerous other organizations whose primary function is not economic development that work in partnership with economic developers. They include the news media, foundations, utilities, schools, health care providers, faith-based organizations, and colleges, universities, and other education or research institutions.
Economic Indicators: An economic indicator is a metric used to assess, measure, and evaluate the overall state of health of the macroeconomy. Economic indicators are often collected by a government agency or private business intelligence organization in the form of a census or survey, which is then analyzed further to generate an economic indicator. Financial analysts and investors keep track of macroeconomic indicators because the economy is a source of systematic risk that affects the growth or decline of all industries and companies
Primary Economic Indicator:
Gross Domestic Product (GDP):
The Gross Domestic Product (GDP) is widely accepted as the primary indicator of macroeconomic performance. The GDP, as an absolute value, shows the overall size of an economy, while changes in the GDP, often measured as real growth in GDP, show the overall health of the economy.
Main Indicators of economic development:
1) National Income Index
Economic development takes place if real national income increases over time.
2)Per Capita Income Group
The national income indicator does not reflect the true picture of the development of the economy.
3)Physical Quality of Life Index
In many developing countries despite economic development, no improvement has taken place in the quality of life.
The physical quality of life index into consideration the non-income elements of life.
The country has a high life expectancy, the lowest infant mortality and the highest literacy is considered to be superior to other countries.
This index of development is superior to the per capita income index because it reveals the end result of the use of National Income in the country concerned.
4)Basic Needs Approach
ccording to this indicator of economic development, the development of an economy is judged in terms of the extent to which the basic needs of the masses are satisfied.
The components of basic needs are food, pure drinking water, sanitation, health, and education, etc.
The index of development is useful especially from the common man’s point of view as he is more concerned with his basic needs rather than the total production in the country.
5)Human Development Index: This index of economic development has been prepared by the United Nations called the Human Development Index (HDI).
It consists of per capita income, educational attainment, and life expectancy. The index does not measure the absolute level of human development. It ranks countries in relation to one another.
The index is superior to other indicators of economic growth as it takes into consideration both income and non-income factors.