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Economic Development is defined as the increase in per capita income over a long period of time. In other words, economic development is the reduction in unemployment, poverty and income inequality.
Modern Concept: Recently, the concept of economic development has been widened to include not only reduction in poverty, inequality and unemployment but also requires improvement in quality of life which includes cleaner environment, better education, good health and nutrition.
Economic Growth is defined as the increase in productive capacity of an economy over time. It is a quantitative term as it represents quantitative increase in production of goods and services in an economy over time.
The indicators of economic development are the changes, which occur in the process of development. The major indicators of economic development are as follows:
Total value of goods and services produced
Average income per person in a year
Access to food, shelter, healthcare, education
Measures basic literacy, infant mortality, life expectancy
Developing Countries are those countries which have low per capita income compared to developed countries like USA, UK, Japan, etc. In these types of countries, the process of developing is going on but not completed.
Income below world average levels
Large population living below poverty line
Rapid population increase straining resources
Large portion of workforce in agriculture
Resources not fully exploited or managed
High rates of joblessness and low productivity work
Limited adoption of modern technology
Modern and traditional sectors coexist
Reliance on raw material exports
Poor healthcare, education, and infrastructure
Capital Formation involves making more and more capital goods. It is defined in both narrow and wider sense.
Generation of surplus income after consumption. Savings come from:
Channeling savings into financial institutions. Methods include:
Using mobilized savings for productive purposes. Investments in:
Increases productive capacity of the economy
Creates jobs through new investments
Enables adoption of modern technology
Builds essential economic infrastructure
Raises income levels and living standards