0% found this document useful (0 votes)
68 views7 pages

EE iNTRO

The document provides an introduction to economic development and discusses traditional and new economic views on development. It defines economic development and distinguishes it from economic growth. Economic development involves structural and institutional transformations to reduce inequalities and raise living standards, not just growth in GNP. Key indicators of development include increases in per capita income and productivity, urbanization rates, and improvements in social indicators like life expectancy. Less developed countries like India are characterized by a dualistic economy, widespread poverty, low capital formation, and infrastructure deficiencies.

Uploaded by

hii_bharti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
68 views7 pages

EE iNTRO

The document provides an introduction to economic development and discusses traditional and new economic views on development. It defines economic development and distinguishes it from economic growth. Economic development involves structural and institutional transformations to reduce inequalities and raise living standards, not just growth in GNP. Key indicators of development include increases in per capita income and productivity, urbanization rates, and improvements in social indicators like life expectancy. Less developed countries like India are characterized by a dualistic economy, widespread poverty, low capital formation, and infrastructure deficiencies.

Uploaded by

hii_bharti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 7

1 of 7

INTRODUCTION TO ECONOMIC BUSINESS

One fifth of the worlds population lives in a state of absolute poverty-


they live on less than $1/day(200 years behind)

1990s-economic development is the focus

Now it is overshadowed by climate change

The poor countries raised their voice and created the ‘third world’

ECONOMIC DEVELOPMENT :

Policies and institutions are crucial as per World Development Report

Traditional economic view :

 How would the newly formed agrarian economies develop after


the war?
1. Present industrialized nations were once agrarian and
underdeveloped
2. War torn European countries had rebuilt in a few years with
the help of Marshall Plan

W W Rostow-five stages of economic development

 Traditional
 Pre-conditions for take off(driving force required)
1. Savings
2. Investment (a) increases income via the multiplier/demand
effect (b) augments productive capacity by increasing the
capital stock. Growth of income requires additional
investment.
2 of 7

 Self sustaining growth


 Drive to maturity
 The age of high mass consumption

Growth requires additional savings to generate the investment as given


by the capital output ratio. If it is 3:1 then Rs 15 crores would be
required if additional savings generated for investment is Rs 5 crores

Growth rate=Avg propensity to save/Capital output ratio

15-21% saving and investment rate required for take off to get a growth
rate of 5%-7%. Gap in investment could be through foreign investment

GNP can grow only if :

1)Changes in factor supplies :

 Additional resources
 Capital accumulation
 Population growth
 Better techniques of production
 Improvement of skills
 Other institutional and organizational arrangements

2) Changes in the structure of demand

 Size and age composition of population


 Level and distribution of income
 Tastes
 Other institutional and organizational arrangements
3 of 7

Changes in factor supplies requires investments and economic


development became synonymous with rapid economic progress as a
recipe for third world nations

Traditional view worked in European countries because :

 Commodity, money and capital markets


 Transport and communication facilities
 Educated and skilled manpower
 Efficient government and bureaucratic machinery

The new economic view :

 Structural and institutional reforms to eradicate poverty


 More employment opportunities
 Reduce income disparities
 Raise the level of living of the masses

The whole system has to go through a process of economic


development and not the growth of GNP only

There must be three values in addition to economic growth

1. Life sustenance-food, clothing, shelter, security


2. Self esteem-economic advancement boosts this up
3. Freedom from servitude-increases the range of human choice

Economic development and economic growth :

1. Definitions

Simon Kuznets-

 long term rise in capacity


4 of 7

 technology
 institutional adjustments

Economic development involves :

 transformation of social system as indicated by Simon Kuznets


 reduction in inequalities
 rise in rate of economic growth
 better quality of life

2) Distinction

 Quantitative
 Expansion of labour force
 Structural changes
 Continous increase in income
 Transformation of agrarian society
 Growth in population
 Interdependence
 Application of science and technology
 Falling costs
 Linkages
Economy is not developing if the disparities are not decreasing

Indicators of economic development :


 Aggregate economic variables
-high rates of per capita output and population growth(per
capita GNP has doubled itself in 34 years). Classification can be
done into low, medium and high growth economies
5 of 7

-increase in factor productivity(output per unit) or growth in


productivity. The growth of productivity is an important
indicator of development
 Structural transformation variables
-structural transformation-shift from agriculture to industry to
services, size of units increase, urban manufacture
-Social and ideological transformation(Gunnar Myrdal)
 Rationality-modern techniques
 Planning
 Socio economic equality
 Improved institution and attitudes
 Factors affecting the international spread of growth
-international economic outreach
-International factor and product flows

Year Urban population as % of total population


Low Middle High
1965 17 42 71
1999 31 50 77

Urbanisation is an indicator of economic development

People who are below the poverty line expect to make a living in the
cities and hence decide to migrate

Social indicators :

 Life expectancy
 Infant mortality
 Daily calorie intake
 Adult illiteracy rate
6 of 7

 Population per physician


 Population per policeman

Less developed countries like India are those countries with relatively
low per capita real income, low level of capital per person, high
incidence of mass poverty and the existence of a dual society where
outdated organizational methods, production techniques and attitudes
coexist with modernism.

Indian Economy as LDC :

1. Dualistic
 Modern vs traditional even 60 years after independence
 Gap widening
 Does not elevate the traditional sector
2. Wide spread poverty-pronounced deprivation in well being
-material, health, education deprivation
-vulnerability and exposure to risks
-Voicelessness and powerlessness

3.Predominance of agriculture

4.Low levels of living

-low per capita income


-other quality of life indicators(malnutrition, mortality, illiteracy,
water , sanitation)

5.Pressure of population

6.Low rate of capital formation

7.Infrastructural deficiencies
7 of 7

8.Widespread chronic unemployment

9.Poor quality of human capital

10.Low level of world competitiveness

11.Disprities, inequalities and imbalances

You might also like