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Chapter 7

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Chapter 7

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pynchluvr2108
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Parameters of Development

08 September 2020 07:29

Factors for ever-increasing interest in the problems


• Awareness among the poor countries of inferior political and economical status and higher demand for
economic development at any cost
• Expectation and consciousness towards higher standard of living
• Economic development as the learning objective of the nations facing colonialism
• Rich countries also have become aware of the steady growth and development and its effect

Economic Growth : The process whereby the real per capita income of a country increases over a long period of
time.
• Focus is increase in per capita income, which is taken in terms of national income aggregates ( Total National Income
and per capita income)

Economic Development : Sustained increase in per capita Income.

The process whereby the real per capita income of a country increases over a long period of time along with
reduction in poverty , inequality and unemployment.

Growth Versus Development

1. Economic Growth is a narrow concept 1. Economic Development is taken as


mean growth and change
2. This implies more output as well as greater 2. This implies change in composition of
efficiency in inputs output among various sectors and
structural changes
3.Increase in income 3. Increase in income and reduction in
poverty , unemployment and inequality
of income
4. Strictly an economic indicator 4. Involves economic (Income, capital
accumulation) as well as non-economic
indicator literacy , housing, health
facility
5. Quantitative Concept, fully measurable 5. Qualitative in nature so not fully
measurable

Economic Development is a multidimensional process. It involves changes in the level of income , distribution of

Chapter 7 Page 1
Economic Development is a multidimensional process. It involves changes in the level of income , distribution of
income , composition of output , social structure , attitudes, eradication of poverty. The main indicators are classified
into two categories.
1. Income based measure of development: mainly per capita income index.
2. Economici development measured in terms of Quality of life Index , such as PQLI (Physical Quality of Life Index)
Basic Need Index , Human Development Index.

Per Capita Income Index


GNP, GDP

Limitations of Per Capita Income Index

1. Composition of Output
2. Distribution of Income
3. Negative component (Poverty ratio, Unemployment , Health hazard)
4. Cost Element of Income
5. Only marketed products are taken into account
6. Comparing Per Capita Income Index for Comparing standard of living of different countries
a. Currency problem
b. Different country uses different concepts of national income
c. Difference in price level

Human Development Index


Human Development is the process of widening people's choice as well as raising the level of well being achieved.

Main Proposition of the concept of Human Development Index


1. Human Development views people and the quality of their life as the centre of development.
2. Human development is the end of all activities , while economic growth is only a means to this end.
3. The purpose of economic development is to widen all choices.
4. Covering all aspect of human development - economic , social , cultural or political.
5. Human development is universal in nature.

Construction of Human Development Index


Under Human Development Report in 1997 is defined as - Human Development is a process of widening people's
choice as well as raising the level of well-being achieved. At all levels of development there are 3 essential choices.
1. To lead a long and healthy life
2. To acquire knowledge
3. To have a decent standard of living.

4 Essential components of Human Development


1. Productivity : People must be able to increase their productivity.
2. Equity : People must have access to equal opportunities.
3. Sustainability : Access to opportunities must be ensured both for present generations and future generation.
4. Empowerment : Development must be by people , not only for them. People's full participation must be ensured.

Computation of HDI
HDI is based on 3 indicators
Life expectancy at This index is calculated by taking a minimum value of 20 and maximum value of 85 (HDR
birth : 2014)
Educational This component is measured by two indicators.
Attainment : a. Adult Literacy Rate : Mean years of schooling for adults aged 25 years and above is
computed. Minimum value is taken as 0 and maximum value is 100.
b. Combined Literacy Rate : Combined primary , secondary and tertiary enrolment ratios
are calculated on the basis of expected years of schooling for children of school entering
age. Combined enrolment ratio is taken as same as ALR.

Chapter 7 Page 2
computed. Minimum value is taken as 0 and maximum value is 100.
b. Combined Literacy Rate : Combined primary , secondary and tertiary enrolment ratios
are calculated on the basis of expected years of schooling for children of school entering
age. Combined enrolment ratio is taken as same as ALR.
Both of these indicators have equal weightage in computing educational attainment
index.(HDI report 2014 , earlier adult literacy was given 2/3rd weightage and Combined
enrolment was given 1/3rd weightage)

Adjusted Gross Real GDP per capita is computed in terms of purchasing power parity (PPP) which is
Domestic Product expressed in dollars (represent decent standard of living). The minimum value is taken 100
Index and maximum value is taken 40000.
We calculate the index in the following way :

INDEX =

These 3 indicators are adjusted in HDI by adding 3 index and dividing it by 3. In some cases we take geometric
mean (GM) of these 3 Index.
HDI =

Factors determining the level of human development :


1. Real per capita income or purchasing power of the people.
2. Life expectancy at birth
3. Healthy life expectancy at birth
4. Access to physicians
5. Access to hospital beds
6. Mean years of schooling
7. Quality of school education
8. Government expenditure on education and health
9. Inequality in the distribution of income among different sections of people.
10. Inequality in the access to proper health and education facilities.

Merits of Human Development


1. HDI has economic and social indicators.
2. HDI is a more comprehensive and broader indicator of the development.
3. HDI has increased our understanding towards development.
4. Ultimate objective is development.

Demerits of Human Development


1. Only a few dimensions are captured.
2. HDI started as national indicator only. State or reginal disparities were not clear from HDI.
3. Human Poverty Index and Gender related Development Index were developed later.
4. Additional dimensions were added later as political and economic participation in decision making.

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