Till 1960 the terms economic growth and economic development were considered to be the same ie synonyms. As a consequence economic development was taken to mean a sustained and steady increase in GDP (@ 5% to 7% per year), and real PCI. This along with some structural changes in the economy like share of agriculture in GNP, NI, national employment decreases and that of secondary and tertiary sector, trading, banking, construction and other services increases (ie change in structure of production and employment).
This approach to economic development is not concerned with the problem of poverty eradication, reduction in inequality and unemployment and other socially undesirable phenomenon.
It was believed that economic growth on its own would take care of all the chronic problems through its trickle down effects. In other words the benefits of economic growth would percolate down to the poor people in some form or another.
Economic growth is easy to realize as output can be raised by large mobilization of resources and raising their productivity.
Economic development is a much wider concept than economic growth. It is economic growth plus certain progressive changes in certain crucial socio-economic variables which determine the wellbeing of a person.
According to modern economists Prof Charles P Kindleberger and Prof B ruce Herric economic development is generally defined to include,
1] Improvement in material welfare particularly for people with the lowest incomes.
2] An increase in the Per Capita Income and standard of living ie eradication of mass poverty, illiteracy, disease and a reduction in the infant mortality rate.
3] Increase in productivity of labour and an increase in employment (a reduction in unemployment).
4] Increase in productivity of capital and the development of money market and capital market.
5] A more equal distribution of income and wealth (a decrease in inequality).
6] In short a shift in allocation of resources to ensure social justice.
7] A substantial increase in the country’s GNP composition of output which will expand industries, financial institutions, trade and commerce, public utilities and Government administration.
8] These changes will bring about changes in the contributions of sectors to national income ie dominance of industry more than agriculture.
9] The economy will therefore be functioning for the welfare of the people.
10] This will bring about a change in the attitude of the people from traditional values to modern values.
Definitions of economic development
1] Meier and Baldwin, “Economic development is a process whereby an economy’s real national income increases over a long period of time”.
2] Michael Todoro, “Development must be conceived as a multidimensional process involving changes in structure, attitudes, institutions as well as the acceleration of economic growth, the reduction of inequality and eradication of absolute poverty”.
3] Milton Friedman, “Economic development is an innovative process that leads to a structural transformation of social systems”.