Meaning and Indicator of Economic Development

It is difficult to give a precise definition of economic development. There is no universally accepted definition of economic development. Different economists have used the term economic development to convey different meanings. This is not surprising because economic development is multi-dimensional in nature. Economists have defined economic development differently depending upon which aspect of economic development they want to emphasize—output, distribution of income, poverty etc.

Traditionally, economic development has been defined as a sustained increase in real per capita income. Thus, traditionally, the term economic development has been used as a synonym for economic growth. However, the experience of many developing countries in the past showed that despite the high rate of increase in per capita income there was little or no improvement in the level of employment, income equality and reduction of poverty. Consequently, economic development was redefined as the process whereby the real per capita income of a country increases over a long period of time, along with reduction of poverty, inequality and unemployment.

This definition of economic development is comprehensive in nature. It takes economic development in a multi-dimensional sense. It includes increase in income, improvement in material welfare, eradication of poverty, reduction of income inequality and unemployment along with elimination of illiteracy, disease and early death. It also takes into account structural changes and changes in social structure and institutions as well. We will, therefore, use this definition of economic development.

Williamson and Buttrick write, "Economic development or growth refers to the process, whereby the people of the country or region come to utilise the resources available to bring about a sustained increase in per capita production of goods and services."

C.P. Kindleberger opines, "Economic development implies both more output and changes in-technical-and constitutional arrangements by which it is produced."

Bernard Okun and W. Richardson observe, "Economic development may be defined as a sustained improvement in well being, which may be considered to be reflected in an increasing flow of goods and services."

According to Walter Krause, "Economic development refers to a process of economic growth within the economy, the central objective of the process being higher and raising real per capita income, for the economy."

Harvey Leibenstein is of the opinion, "Development implies the enhancement of an economy's power to produce goods and services per capita, for such enhancement is the pre-requisite to raising standard of living."

Similarly, Prof. Viner says, "The term economic development signify not merely economic growth, but economic development with which is associated either rising per capita levels of income or the maintenance of existing high levels of income."

According to UNO, "Development concerns not only man's material needs, but also the improvement of social conditions of his life. Development is, therefore, not only economic growth but growth plus change-social, cultural and institutional as well as economic."

This definition of economic growth underlines three main points. (i) the sustained increase in national product per capita is a manifestation of economic growth, (ii) advancing technology provides the basis for sustained economic growth (iii) institutional and ideological adjustments must be made, failing with growth potential that is created by growing productive forces will not be realised.

Thus, economic development implies progressive changes in the socio-economic structure of a country. On the contrary, economic growth refers to increase over time in a country's real output of goods and services i.e. appropriately called the product per capita. In this way, the term economic development is more comprehensive.