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Economic Growth and Development

C hapter Two. Economic Growth and Development. GDP AND GNP. GDP is the basic measure of national output and economic growth. GDP is the value of all final goods and services produced within the country’s geographical territory, irrespective of the ownership of resources.

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Economic Growth and Development

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  1. Chapter Two Economic Growth and Development

  2. GDP AND GNP GDP is the basic measure of national output and economic growth. GDP is the value of all final goods and services produced within the country’s geographical territory, irrespective of the ownership of resources. GNP consists of income produced by the country’s owned resources, irrespective of the place of production. For ex: Indian Software Professional’s (working in US) salary in US is part of US GDP while Citibank’s income in India is India’s GDP.

  3. ECONOMIC GROWTH • GNP – Net Factor Income from abroad = GDP • When US based Indian Software Professional remits his salary to India, that gets added to India’s GNP. • GNP at market prices – Indirect Taxes + Subsidies = GNP at factor cost

  4. Family Model of Economics and Management

  5. Economic Growth and Development • Eco.Growth = Uni-dimensional Concept, measured in terms of increase in national income (in % terms) • Economic Development - Multidimensional concept, measured in terms of qualitative factors such as standard of living, education, health etc. • Economic Growth is only a pre-condition for development

  6. Traditional Tools to MeasureEconomic Growth 1. Gross Domestic Product/Gross National Product 2. Per Capita Income Growth of Per Capita national income takes into account the ability of a nation to expand its output at a rate faster than the growth of its population.

  7. Characteristics of Developing Nations • Low levels of living characterised by low income, inequality, poor health and inadequate education. • Low Levels of Productivity • High Rates of Population growth • Substantial dependence on agricultural production and primary-products exports • Prevalence of imperfect market • Dominance, dependence and vulnerability in international relations

  8. Economic Development • Improvement in Quality of life, ie, better education, less poverty, higher standards of health etc. Development must be conceived as a multi-dimensional process with improvement in social indicators. Most common way to define the developing world is by Per Capita Income. Best known system is that of World Bank. World Bank has ranked countries by their levels of Gross National Income per Capita.

  9. MEASURING GROWTH AND DEVELOPMENT • Per Capita Income • Human Development Index (first published in 1990 by UNDP). HDI is a measure of a desired standard of living that has a value between 0 and 1. HDI takes into account 3 major factors: a. Life Expectancy at birth (Healthy Life) b. Levels of educational attainment c. GDP per capita

  10. HDI Ranking, Score and Per Capita Income (PPP)

  11. Per Capita income Rank – HDI Rank • India 0 • China +7 • S.Africa –49 • Oman –33 • Kuwait –14 • UK +5 (A +figure indicates that HDI Rank is better than the real GDP per capita rank, -ve indicates the opposite).

  12. HDI, GDI, GEM • HDI value lies between 0 and 1. HDI is constructed using variables life expectancy at birth (health), literacy and mean years of schooling (Education) and per capita income. • GDI (Gender Development Index) and GEM(Gender Empowerment Measure) introduced by UNDP in 1995. GDI is simply, the HDI adjusted downwards for gender inequality.

  13. GEM • “GEM’ indicates whether women are able to actively participate in economic and political life. The variables used for construction of GEM are a)% of seats held in parliament for women, b) % of women administrators and managers c) % of women as professional workers

  14. HDI and GDP Per capita ranks (Country-wise) • (GDP Per capita rank in brackets) • Canada 5(8), France 16 (15),Norway 1(9), USA 10(3), The Netherlands 12(19), Japan 11(7) Switzerland 7(4) Saudi Arabia 77(41), Nigeria 158(173) • Brazil 63(68), Denmark 14(10), Germany 20(16), Ireland 8 (25) • Source: Human Development Report, UNDP

  15. HDI and GEM Values(GEM in brackets) • Srilanka 0.71(0.31), India 0.45(0.23), Pakistan 0.45 (0.19) • UAE 0.86 (0.24), Kuwait 0.84 (0.33), • Egypt 0.61(0.27), Moroco 0.57(0.30) • OECD Countries - Canada 0.96(0.70), France 0.95(0.45), Norway 0.94 (0.78) • USA 0.94 (0.67),Sweden 0.93 (0.78)

  16. INTERSTATE RANKS (PCI & HDI) in India • Punjab 1(2), Haryana 2(4), Kerala 10(1), Maharashtra 3(3), Gujarat 4(5), TN 8 (7), Karnataka 6 (6), W.Bengal 7(9), AP 5 (10) • MP 13 (14), Orissa 14(13), UP 15(17), Rajastan 11 (12), Bihar 16(15) • References: Human Development Reports-UNDP Publication, India Development Report-IGIDR

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