Economic Growth

And Development

W.P.W Anjalika – Lecturer (Probationary)

Department of Maritime Transportation Management and Logistics
Ocean University of Sri Lanka
What is Economics Growth

• Rise the value of everything produced in the economy

• Economic growth is measured by the increase in a country’s total
output or Gross Domestic Product (GDP) or Gross National Product
(GNP) over a long period of time.
• The Gross Domestic Product (GDP) of a country is the total value of
all final goods and services produced within a country over a period
of time.

• Therefore an increase in GDP is the increase in a country’s

production over a period of time.

• This is a Quantitative concept.

(can be measured numerically)
What is Economics Growth and recession?
In similar fashion, growth in a country’s economy means increases in
physical output or production.

P.PC Curve shift to the right side with the Economics Growth .
• Economic recession means a significant decline in economic activity.
• Economic recession increases with the,
• Unemployment
• Fall Purchasing power
• Business go bankrupt
• Crisis of exchange rate
What is Economics Growth Rate ?

Economic growth rate is the rate of change of real GDP expressed as a

percentage per year.

To calculate this growth rate, we use the formula:

Real GDP in Real GDP in

current year – previous year
Growth of
real GDP x
= 10
Real GDP in previous
0
year
Example
Year 2019 2020 2021

Real GDP($) 17.37 17.66 18.05

Find the GDP growth rate for 2020?

GDP Rate in 2020 = 17.66 - 17.37

* 100%
17.37
Answer?? 1.67%
Economic activities include GDP
Source- CBSL annual report, 2022
Source- CBSL annual report, 2022
Economics Growth rates In Sri Lanka
Economics Growth in Sri Lanka is represented by the CBSL annual report
every year.
The highest economic growth represented in 2012 - 9.14%
The lowest economic growth represented by 2020 - -4.6%
Economic growth rate in 2021 - 3.5%
Economic growth rate in 2022 - -7.8%
What happened to the Sri Lanka’s Growth Rate in 2022?

1. Sectorial changes in terms of Agriculture, Industrial and Service sectors.

2021 2022
Source: CBSL Annual Report.,2021, 2022
 2. Growth Rates of Agriculture Activities

2021 2022
3. Growth Rates of Industry Activities
4. Growth Rates of Services Activities
• Economics growth rate in recent years.

3.6% 3.3%

2.3%

-3.6%
Factors Affecting to Economics Growth
(Sources of Economics Growth)

1. Natural Resources
 Natural resources like (oil, mineral, land, water, forests and natural
gas deposits) may boost economic growth as this shifts or increases
the country’s Production Possibility Curve.
Realistically, it is difficult, if not impossible, to increase the number
of natural resources in a country.
 Improved land management may improve the quality of land and
contribute to economic growth.
Example: Saudi Arabia’s economy has historically been dependent on
its oil deposits.
2. Physical Capital or Infrastructure

Increased investment in physical capital, such as factories,

machinery, and roads, will lower the cost of economic activity.

Better factories and machinery are more productive than physical

labour.

This higher productivity can increase output.

Example: having a robust highway system can reduce inefficiencies in

moving raw materials or goods across the country, which can increase
its GDP.
3. Population or Labour

A growing population means there is an increase in the availability

of workers or employees, which means a higher workforce.
4. Human Capital

An increase in investment in human capital can improve the quality

of the labour force.
A skilled labour force has a significant effect on growth since skilled
workers are more productive.
5. Technology

The technology could increase productivity with the same levels of

labour, thus accelerating growth and development.

This increment means factories can be more productive at lower costs.

Technology is most likely to lead to sustained long-run growth.

6. Law
An institutional framework that regulates economic activity such as rules
and laws. There is no specific set of institutions that promote growth.
COSTS AND BENEFITS OF GROWTH
KEY TAKEAWAYS

• Economic growth is an increase in the production of

goods and services in an economy.

• Increases in capital goods, labour force, technology, and

human capital can all contribute to economic growth.

• Economic growth is commonly measured in terms of the

increase in aggregated market value of additional goods
and services produced, using estimates such as GDP.
 Can you answer the following questions?
1. Explain the concept of ‘’economics growth’’?

2. What do you mean by economic growth rate? Explain using

your own example.

3. Describe the major advantages and disadvantages of

economic growth.

4. How following factors affect increasing the economic growth

Human Capital
Infrastructure
Natural Resources
What is Economics Development?

Development is process of improving the quality of all human

lives.

Economic development is shaped not only by economic factors but also

by non-economic factors like
Environmental,
Social, and
Cultural conditions of the economy.

Meaning of Development is not purely an economic phenomenon but

rather a multi-dimensional process (Qualitative and Quantitative
process) involving of entire economic AND social system.
WORLD BANK DEFINITION OF ECONOMIC DEVELOPMENT
World Bank in its 1991 World Development Report asserted that the
“challenge of development is to improve the quality of life.”

 The improved Quality Of Life involves

 Higher incomes
 Better education
 Higher standards of health and nutrition
 Less poverty
 A cleaner environment
 More equality of opportunities
 Greater individual freedom
 A richer cultural life.
Dudley Sears has defined development as,
“The reduction and elimination of poverty, inequality and
unemployment within a growing economy”

Nobel Economist Amartya Sen writing in,

“Development as Freedom”,

development concerned with improving the freedoms and capabilities of the

disadvantaged, thereby enhancing the overall quality of life - what really
matters are the capabilities of people, that is, the extent of their opportunity
set and of their freedom to choose among this set, the life they value
Economics Development Indicators by
(NEW ECONOMICS VIEW)

1. Health and Nutrition

2. Education and Skills
3. Income and Consumption
4. Employment
5. Capital and Non-Human Resources
6. Housing, Utilities and Environment
7. Public Safety and Justice
8. Social Mobility
9. Political Values
 One can get the economic growth of a country by comparing its GDP
at present with the GDP last year.

However, it is not so easy to measure development as it is based

upon many parameters such as health, education, literacy levels, and
life expectancy and so on.

Examples: China and India

That country have huge GDP but not labelled developed because of
their lowly ranks on other parameters such as health, education and life
expectancy is enough to demonstrate the difference between economic
growth and development.
Michael Todaro specified three objectives of
development:

• Life sustaining goods and services:

To increase the availability and widen the distribution of basic life-
sustaining goods such as food, shelter, health and protection.

• Higher incomes:
To raise levels of living, including, in addition to higher incomes, the
provision of more jobs, better education, and
greater attention to cultural and human values, all of which will serve not
only to enhance material well-being but also to generate greater
individual and national self-esteem
• Freedom to make economic and social choices:
To expand the range of economic and social choices available to
individuals and nations by freeing them from dependence not only in
relation to other people and nation-states but also to the forces of
ignorance and human misery.
ECONOMIC GROWTH VS. DEVELOPMENT

 Economic growth is not economic development.

 Development is often dependent on economic growth, but economic
growth does not guarantee economic development
 Development is about improving the quality of the lives of all citizens
and particularly disadvantaged people.
The Important characteristics of Economic
Development:
1. Low per capita real income:

It means the average person doesn’t earn enough money to invest
or save money.
They suffer from low per capita real income level, which results in
low savings and low investments.
2. High population growth rate/size

This is because of lack of family planning options, and the belief

that more children could result in a higher labour force for the family
to earn income.

This increase in recent decades could be because of higher birth

rates and reduced death rates through improved health care.

In a number of developing countries, the birth rate exceeds the

death rate and there is a high dependency ratio, with a high
proportion of children being dependent on a small proportion of
workers.
3. High rates of unemployment

In rural areas, unemployment suffers from large seasonal

variations. However, unemployment is a more complex problem
requiring policies beyond traditional fixes.
4. Low levels of saving due to low income:
Poor people cannot afford to save and so the savings ratio (saving as
a percentage of disposable income) of a country, where the average
income is low, is likely to be low.

5. Low life expectancy and high infant mortality rate:

Someone born in Japan can expect to live up to the age of 83
whereas someone born in Zimbabwe has a life expectancy of 37
years only.
How about life expectancy in Sri Lanka??

6. Low levels of education and health care:

These tend to result in low levels of productivity
7. Low levels of capital goods and poor infrastructure:
These again reduce productivity.

8. Poor housing and sanitation:

A significant number of people may not have access to clean
water for drinking and washing.

9. Relatively high number of workers, employed in the

primary sector:
Underemployment can be high in agriculture. For instance, ten
persons may be doing the work of six. This, again, lowers
productivity.
10. Dependence on primary sector:

Almost 75% of the population of low-income countries is rurally based.

 As income levels rise, the structure of demand changes, which leads to

a rise in the manufacturing sector and then the services sector.

11. Dependence on exports of primary commodities:

Since a significant portion of output originates from the primary sector,

a large portion of exports is also from the primary sector

 For example, copper accounts for two-thirds of Zambia’s

exports.
Sri Lanka – tea, rubber and coconut
The Human Development Index (HDI)
(Measurement of Economic Development)

 Human Development Index published each year by the United

Nations Development Programme

The HDI summarizes a great deal of social performance in a single

composite index combining three indicators,

• Long Healthy Life

• Knowledge
• A Decent Standard of Living
The Human Development Index (HDI)
(Measurement of Economic Development)
The Human Development Index (HDI)
(HDI Index of countries)

Human Development Report, 2019

Questions and Answer Round…
1. Explain the term of ‘’Economics Development’’ using different definitions.
( 6 Marks)

2. Economic development and economic growth are various concept. Do

you agree this statement. Discuss.
(12 Marks)

3. What are the factors affect to reduce the economics development in Sri
Lanka? (6 Marks)

4. What is the Human Development Index (HDI)? Explain main dimensions

of it. ( 5 Marks)
Sustainable Development

“Meeting the needs of the present generation without

compromising the ability of future generations to meet their own
needs.”
-Brundtland Commission, 1987-
Sustainable development comprises with three pillars as,
Importance of the sustainable development
1. Improving the quality of human life

2. Countries must be allowed to meet their basic needs of

employment, food, energy, water and sanitation.

3. Protect eco system (Maintain stable relationship between human

activities and the natural world)

4. social progress and equality

5. reducing pollution, poverty, poor housing and unemployment

6. Reduce climate change and poor air quality to protect human and
environmental health
Can you answer the following
question?
1. What do you mean by sustainable development?

2. Identify the main difference in between sustainable development

and economics development?

3. Discuss the importance of the sustainable development.

THANK YOU