ECONOMIC

GROWTH,
DEVELOPMENT
AND POVERTY:
OVERVIEW

MODULE 1

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 Module Content

Meaning of Measurement – HDI,

Economic Values in Economic Green GDP, GHI, Characteristics of
Development and Development Gender Development
Economic Growth Empowerment Index

Characteristic
Features of Factors facilitating Market
Developing development imperfections
countries

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What is Economic Growth?

Economic growth is defined as the total

value of the final goods and services
produced in an economy over a given
period. It is calculated in real terms to
corner the effects of inflation and to
arrive at the real picture of the
economy. It is usually calculated as a
percent Gross Domestic Product (GDP)
increase.

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 Factors Affecting
Economic Growth

• The factors affecting economic growth are as follows:

• Infrastructure: Developing key infrastructure assets in the economy, like road
machinery and railways, increases efficiency and leads to economies of scale.
• Optimum utilization of natural resources: To ensure growth, it is of utmost
importance that the resources are best utilized to reduce wastage and boost
economic productivity.
• Research and development: Investing research and development domain
positively impacts development, increasing labor productivity and reducing the
cost involved.
• Human capital: Human resources are the key to the development of an
economy. The higher the skills and capacities of the workforce, the greater the
development of the economy.
• The availability and efficiency of financial resources, including banking
systems, influence economic growth.
• Global economic conditions and international trade dynamics affect India's
economic performance.
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 What is Economic
Development?
Economic development is the process of improving
a country's economy over time. It involves
increasing the nation's wealth and standard of
living for its people. Economic development
includes various factors like growth in income,
better job opportunities, improved healthcare, and
education. It aims to create a stable and
prosperous economy for the well-being of the entire
population.

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 Human Resources: An increase in human capital in the
economy leads to the overall growth and development of
the economy.

The factors Education: Better literacy rates among the population

leads to better understanding. It not only raises the
workforce's efficiency but also leads to the development

affecting of the economy.

economic
Infrastructure development: Growth in the infrastructure
parameter raises the economy's efficiency and improves
the standard of living.

development Natural resources: The availability of natural resources

are as follows: like forests, wildlife, minerals, etc, has the potential to
result in economic development.

Capital formation: Capital formation is the country's

savings and investment rate. The economic development
of a country depends on the rate of capital formation in
the country.
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 Characteristics of Economic Development
Economic Development refers to the positive change brought about in the living
standard of the citizens of the economy by development in social indicators like
health education, etc.
Economic development leads to the reduction in poverty levels and improvement in
the quality of life of the citizens.

Economic development is a positive process which results in structural changes in

the economy in terms of infrastructural developments, etc.

The process of economic development is a never-ending process.

Economic development helps in raising the per capita income in the country which
would result in a boost of national income.
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Five pillars of Economic Development

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Human Development Index | Human
Development Reports (undp.org)

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Measurements of Economic Development

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 Green GDP

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What is the Global Hunger Index?

The Global Hunger Index (GHI) is a tool for comprehensively measuring and tracking hunger at
global, regional, and national levels. The Global Hunger Index aims to track hunger at the world,
regional and country levels. GHI scores are based on the values of four component indicators.
GHI ranks countries on a 100-point scale, 0 representing zero/no hunger. The GHI scores are
based on four indicators. Taken together, the component indicators reflect deficiencies in
calories as well as in micronutrients. Thus, the GHI reflects both aspects of hunger
(undernutrition and malnutrition).
UNDERNOURISHMENT: The share of the population whose caloric intake is insufficient.
CHILD STUNTING: The share of children under the age of five who have low height for their age.
CHILD WASTING: The share of children under the age of five who have low weight for their height.
CHILD MORTALITY: The mortality rate of children under the age of five (a reflection of the fatal mix
of inadequate nutrition and unhealthy environments).
Global Hunger Index Report is an annual report (peer-reviewed) published by Concern Worldwide
of Ireland and Welthungerhilfe (a German non-profit organization).
 Gender Development Index

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• Measurement of Economic Growth
• The primary measure of economic growth is real GDP,
which accounts for both goods and services produced
while adjusting for inflation.
• Real GDP can be assessed using three methods.
• Quarterly growth at an annual rate: This method
calculates the change in GDP from one quarter to the
next and then annualizes it. For instance, a 0.3%
quarterly change extrapolates to a 1.2% annual rate.
• Four-quarter or year-over-year growth rate: This
approach compares the GDP of a single quarter in two
successive years as a percentage, helping account for
seasonal variations.
• Annual average growth rate: This method calculates
the average change across all four quarters. For
instance, if four-quarter rates in 2022 are 2%, 3%,
1.5%, and 1%, the annual average growth rate for the
year would be (2% + 3% + 1.5% + 1%) ÷ 4 = 1.875%.

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• Major Principles of Economic Development and
Growth
• Economic growth and development are influenced by
several key principles:.
• Natural resources, such as land, drainage systems,
and mines, play a significant role. Mercantilism, for
instance, emphasizes that a country's wealth,
including gold and trade surpluses, can stimulate
growth.
• Capital formation, as noted in Adam Smith's theory,
contributes to increasing returns to economic scale. It
depends on workers' activity and savings, which can
be invested in producing more capital.
• Human resources are vital, as per the neo-classical
model, focusing on labor productivity, workforce size,
and factor inputs. Skilled and effective labor can
boost growth and productivity, fostering technological
advancements and better health.
• Population growth is seen as positive in
underpopulated countries but, according to
Malthusian theory, excessive population can lead to
food and resource scarcity.

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• The importance of economic growth and development is as follows:
• Economic growth boosts a country's overall prosperity and standard of living.
• It creates more job opportunities for people, reducing unemployment rates.
• Increased economic growth means more revenue for the government, which
can be used for public services and infrastructure development.
• It encourages investment in new technologies and industries, driving
innovation and progress.
• Economic growth contributes to reducing poverty and income inequality in a
nation.
• Economic development ensures long-term and sustainable growth for a
country.
• It focuses on improving the well-being of citizens, including better healthcare
and education.
• Developing various sectors of the economy leads to balanced and diversified
growth.
• Economic development addresses social issues like poverty, hunger, and
gender inequality.
• It helps in a nation's overall progress and stability, creating a better quality of
life for its people.
• International Organizations Report and commercial institutions gauge the
true picture of the economy by data available through the parameters of
economic growth.
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