Growth vs Development by Salman Anjum

A group presentation in IIPMB

1. GROWTH Vs. DEVELOPMENT : THE INDIAN PERSPECTIVE SECTION-02 GROUP-07 Salman-70 Abhishek-46 Harjit-58 Basavaraj-52 Navaneeth-64

2. InTroduction The two words ‘ growth ’ and ‘ development ’ were often used interchangeably in economic discussion. Develop­ment is taken to mean ‘ growth plus change ’, whereas economic growth means growth only quantitative expansion of an economy. Economic growth is, thus, a quantitative con­cept , while economic development is a quali­tative concept . Economic growth is usually measured in terms of an increase in real GNP or GDP over time or an increase in income per head over time. Develop­ment is not only economic growth but growth plus change— social, cultural and institutional as well as economic. Growth is considered to be the basis of advancing real living standards or human welfare. At the same time, it is also true that growth does not necessarily lead to an increase in human welfare. Economic de­velopment is more fundamental than eco­nomic growth.

3. Why economic growth is not upto the mark? ( 1) Economic growth is associated with an increase in GNP/GDP per capita. per capita income does not give any information about income distribution. (2) Economic growth does not talk about the quality of life i.e. literacy, standards of health and nutri­tion, etc. (3) Economic growth does not deal with environmental issues.

4. Economic development Economic development is a value-based concept . It should include not only the acceleration of economic growth but also the reduction of inequality and eradication of poverty, increase in employment opportunities and welfare of the masses, etc. However, economic development may mean more. Economic development must en­compass human development. Amartya Sen defines economic development in terms of ‘en­titlement’ and ‘capability’.

5. Importance of economic growth of india India has sustained  rapid growth of GDP  for most of the last two decades leading to  rising per capita incomes  and a reduction in absolute poverty. Per capita incomes (measured in US $) have doubled in 12 years But India has one third of all the people in the world living below the official global poverty line. It has more poor people than the whole of sub-Saharan Africa Per capita income is $1,270, placing India just inside the Middle Income Country category India's per capita income is 1/20th that of the UK. Life expectancy at birth is 65 years and 44% of children under 5 are malnourished. The literacy rate for the population aged 15 years and above is only 63% compared to a 71% figure for lower middle income countries.

6. Contd … Despite a strong attempt to become an open economy, exports of goods and services from India account for only 15% of GDP although this will rise further in the years ahead India runs persistent trade and fiscal deficits and has suffered from high inflation in recent years. India's growth rate has slowed and high inflation is a constraint on competitiveness and growth. Investments by Indian businessmen abroad have overtaken foreign direct investment for the first time – reflecting a lack of confidence among Indian entrepreneurs about their home economy.

7. Importance of development of india India has followed a different  path of development  from many other countries. India went more quickly from agriculture to services that tend to be less tightly regulated than heavy industry. Factors influencing India’s development are: (1) A fast-growing population of working age. (2) Wage costs are low in India . (3) Highly advanced and attractive clusters of businesses in the technology space – witness the rapid emergence of Bangalore as a hub for global software businesses .

8. Limitations in india’s growth and development Poor infrastructure - notably in transport and power networks Low productivity and weak human capital. A high % of workers are low-skilled and work in small businesses. High inflation and a persistent trade deficit Low national savings as a share of GDP, low share of capital investment Relatively closed economy - India is a net importer of primary products

9. Growth and development difference in income distribution A recent  Oxfam research report  shows that the  richest 1 percent  have seen their share of global wealth increase from 44 percent in 2009 to  48 percent  in 2014.  The Wealth of the richest 1 percent is 65 times the wealth of bottom half.  In 2014, 80 richest persons have as much wealth as the poorest 50 percent (about 3.5 billion people). Development is not just about growth; it is also about its distribution. So it is entirely possible for an economy to grow even rapidly without creating much jobs as has been the case in India recently – growth only increased inequality.

10. The Sen-Bhagwati Debate Dr. Amartya Sen Dr. Jagdish Bhagwati

11. Views of DR. AMARTYA SEN ON GROWTH AND DEVELOPMENT Nobel winner professor of economics and philosophy at Harvard University,  Amartya Sen , whose idea of development culminates in the  capability theory . Sen believes that India should invest more in its social infrastructure like health and education to improve human capabilities that will cause economic growth. Without such investments, he fears that inequality will widen which will ultimately falter the growth process.

12. Views of DR. Jagdish Bhagwati ON GROWTH AND DEVELOPMENT A Columbia University professor of economics, Jagdish Bhagwati argues that focus on growth is important so that enough resources are available for social welfare programs. In his view, inequality may raise with growth initially but sustained growth will eventually also sustain the social benefit programs to redistribute and mitigate the effects of the initial inequality.

13. Differences on views by both on growth and development (1) Bhagwati wants growth to precede redistribution to improve people’s capabilities. But Sen wants to focus on increasing capabilities as a way to push growth. He argues that there is no example of unhealthy, uneducated labour producing meaningful growth rates. Bhagwati counters by arguing that putting redistribution before growth is like putting the cart before the horse. (2) To sum up in one sentence: Bhagwati wants to focus on reforms to push economic growth, and Sen wants the focus on tackling poverty and inequality through social measures.

14. Factors to focus for the growth and development of india (1) Focus on Infrastructure The government also failed to create sufficient basic infrastructure – transport, electricity, communication etc – to help the manufacturing sector. What actually grew is the service sector around the IT. Another sector that has gone up is the real estate. It is kind of rent seeking and speculative sector. So services and construction account for roughly 70% of the increase in output over the last 20 years. The industrial growth remained limited to around 18%. As a result, we ended up with large export-import gap.

15. ( 2) Strengthen Welfare Program As Sen points out, many countries with lower per capita income than India have done better. For instance, in Bangladesh infant mortality has come down below that of India’s, starting with much higher figure, and open defecation is limited to just 8% population there compared with India’s over 50%. A unique and outstanding example comes from Bhutan and its use of  Gross National Happiness (GNH)  to guide development. It’s human development index (HDI) increased from 0.146 in 1991 to 0.522 in 2010 without unduly impairing its cultural, spiritual or natural treasures. Compare it with India’s current HDI of around 0.55.

16. Invest in Skill Development and Entrepreneurship As the government is shifting focus from agriculture to manufacturing, the challenge is to support this transition by retraining agricultural workers for more productive jobs with better wages. This means that government must focus on areas like skill development, entrepreneurship, and education .

17. Conclusion Economic develop­ment involves something more than economic growth. In fact, there are certain qualitative dimensions in the process of development that are conspicuous by their absence in the growth or expansion of an economy. Economic devel­opment implies both more output and changes in the technical, institutional arrangements by which it is produced, and a change in attitudes and values. “Development concerns not only man’s material needs but also improvement of the social conditions of his life. Develop­ment is, therefore, not only economic growth but growth plus change—social, cultural and institutional as well as economic. Develop­ment is, thus, not purely an economic phe­nomenon; it has to be conceived of as a multi­dimensional process.”

18. REFERENCES 1. Economic Growth and Development in India ; by Nikita dutta http://www.economicsdiscussion.net/economic-growth/economic-growth-and-development-in-india/6475 2. Economic Development vs Economic Growth www.diffen.com/differences/Economic_Development_vs_Economic_Growth 3. India: Growth vs Development Debate ; http://socialissuesindia.wordpress.com/2015/03/23/india-growth-vs-development-debate/amp/ 4. Website http://www.tutor2u.net/economics/references/india-economic-growth-and-development 5. Youtube : Growth vs Development: Nobel winner Amartya Sen discusses way ahead for India with NDTV… https://youtu.be/p3aj9Ha-p0g

19. THANK YOU