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Difference Between Economic Growth and Economic Development

  • Ayush Singh Rawat
  • Jan 25, 2021
  • Updated on: Jun 29, 2021
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Nowadays, economic fluctuation adversely affects a country’s well-being, making the economy a concept of supreme importance. To look over a nation’s progress, we need to study their economy and that would be ample to determine whether the country is flourishing or experiencing depression.


Growth and development are synonyms for each other but when ‘economic’ is prefixed to each of the words, then both of them contradict the similarity. Adding economic to the words creates fundamental differences between growth and development which are very important and become even more prominent when countries start depending on them. 


Our discussion during this blog will focus on concepts and characteristics of economic growth and development and some key differences that isolate the terms and their functions.


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Economic growth


Economic growth is considered to be an increase in the production of goods and services by per person in a population, compared from one time period to another. An increase in capital goods, labour forces, new territories, technology, and human capital can also contribute to economic growth.

An image showing example of the economic growth

Depiction of economic growth

Economic growth is commonly measured by the increase in the average market value of additional goods and services produced, using GDP (Gross Domestic Product).


How is GDP calculated?


  • GDP can be calculated by adding up all of the money spent by consumers, businesses, and the government in a given period of time.

  • It can also be calculated by summing up all of the money received by all the earning members of the country.

  • In either case, the number is an approximate value of "nominal GDP."

  • Real GDP is then calculated by removing any changes made due to inflation.


In easy words, economic growth refers to an increase in gross production in an economy. That leads to an increase in incomes of the people, hence persuading them to spend more and increase their quality of living. For example, India has recorded a 24% shrink in its GDP in the last four decades during the COVID-19 span.


Factors affecting Economic growth


  • Better capital goods- Good quality tools help in improving the working and the outcome of the product. Better and more productive tools mean that workers can produce more output in a given period of time.


  • Technology- Technology allows working to become more efficient and more output-yielding. New technology helps in creating more output even with the same stock of capital goods as its primary goal is to reduce time and increase outcome. Also, all the technologies have a role in the business in their entirety. 


  • Labour Force- The more the number of labour means more the set of hands. The extra hands help in increasing the output. It is important for the right type of workers to flow to the right jobs in the right places in harmony with the right types of capital goods in order to realize their productive potential. 


  • Human capital- It is the expertise and skills provided to unskilled labour to convert him into skilled labour through skill training, trial and error, or simply more practise. This skill development helps in raising the productivity out of the labour.


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Economic development


Economic development is the increase in the standard of living from a low-income economy to a high-income economy. It considers factors such as health, education, working conditions, domestic and international policies, and market conditions with a focus on improving conditions in developing countries. For example, all such factors were affected during the COVID-19 times, even coronavirus has impacted the global economy adversely,


Economist Amartya Sen proposed that development is about creating freedom for people and removing obstacles to greater freedom, Greater freedom enables people to choose their own destiny. 


Obstacles to freedom, and hence to development, include poverty, lack of economic opportunities, corruption, poor governance, lack of education and lack of health.

An image is depicting a simple illustration of the economic development.

A glimpse of economic development 

Economic development focuses on health, education, working conditions, and market conditions. The application of economic development is complex and varied as the cultural, social, and economic background of every nation is different.


For a common audience, economic development is the improvement in the quality of life which has a direct and positive effect on the economic growth of the country as a whole.


The HDI(Human Development Index) is used to measure a nation’s economic development. The HDI tracks the course of development of countries over periods of time.


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How is HDI calculated?


 The HDI has two main features: 


A scale is taken from 0 which denotes no development to 1 which denotes complete development. An index, which is based on three components:


  • Longevity, measured by life expectancy at birth.

  • Knowledge,  measured by adult literacy and the number of years children are enrolled at school.

  • Standard of living,  measured by real GDP per capita at purchasing power parity(PPP).


Factors affecting Economic Development


  • Life expectancy- Many factors affect the Life expectancy of people living in a certain region, like eating habits and the occurrence of war, pandemic or natural disasters. Pollution-level checks also determine the average life of the people. The coronavirus pandemic is supposed to cause a decrease in Life expectancy by 1-9 years.


  • Adult literacy- According to WHO, It is the percentage of people who are aged 15 and above and can read and write a simple statement in their everyday life. As per the survey provided at Wikipedia, the global literacy rate for all people aged 15 and above is 86.3%. The global literacy rate for all males is 90.0% and the rate for all females is 82.7%. 


  • GDP per capita- GDP is the most common way of measuring the standard of living as money reflects our lifestyle. GDP per capita is found by measuring Gross Domestic Product in a year and dividing it by the population in the economy.


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  • Levels of infrastructure e.g. transport and buildings. For example, in recent years, economic development in parts of Africa and Asia have been improved due to increased investment in roads, railways and seaports. These upgrades in transportation and infrastructure determine that the flow of traffic remains smooth. Thus, making people residing in such neighbourhoods happy.


Now that we have established the basics of Economic growth and economic development. We shall move forward to differentiate between both of them.


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Economic growth vs development


  1. Concept


Economic development is a broader concept than economic growth. The development reflects social and economic progress and requires economic growth. Growth is a necessary condition for development, but alone it cannot guarantee development.


Even in order to calculate the HDI we have to calculate the real GDP per capita so as to determine the standard of living, which is just a small ingredient in the recipe of HDI.


Also, Economic development is considered to be a broader concept than economic growth because economic growth only takes monetary development into account whereas economic development requires social development and monetary development to go hand in hand.


(Also read: Factors affecting PED)


Economic development covers more ground than economic growth and that is why economic development is the one which takes more time and resources.


This is why economic development can happen with economic growth but it is not necessary if economic growth is taking place then economic development will also happen. Economic growth can be termed as a subset of economic development. 


  1. Analysis


Economic growth is a uni-dimensional approach to the growth of a country whereas Economic development is a multi-dimensional approach to the growth of a country as it takes many significant conditions into play.


As it might be clear that Economic growth is a quantitative analysis and Economic development is a quantitative as well as qualitative analysis and can be conducted using various statistical data analysis techniques


Economic development is a quantitative as well as qualitative analysis because it shows the sustainable increase in real GDP that implies increased real per capita income, better education and health as well as environmental protection, legal and institutional reforms and an efficient production and distribution system for goods and services. 


Economic growth on the counter-hand shows only the sustained increase in the real GDP of a country over a period of time and hence a quantitative analysis.


Economic growth can be considered a weak approach to measure growth as not only growing economically is necessary but also social well-being is just as important. Economic growth is measured in terms of GDP, whereas Economic development is measured in terms of HDI.


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  1. Applications


Economic growth is used in developed countries as a measure of growth as it is assumed if a nation is developed then the quality of life would already be imminent.


Economic development is applicable in developing countries as this measures economic growth and the quality of life which are simultaneous processes. It would be very difficult to maintain a good lifestyle if the money is not good enough.


Economic growth is a short term process as GDP is calculated every year to find out the income of the country. Economic development is a long term process to improve the quality of life. It takes many years to build resources and apply them.


Economic growth is also a short term process because it is an automatic process that may or may not require intervention from the government whereas economic development requires intervention from the government as all the developmental policies are formed by the government. Thus, becoming a long term procedure.




Economic development seems to be the overall champ in calculating the progress of a country but Economic growth provides easy and reliable stats of development in developed countries. Both of them have their flaws and advantages and clearly both appeal to different target audiences. 


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Economic development appeals to countries that are developing and knows that it will be a long process. Economic growth attracts developed countries who want fast and easy stats about the increase in the income of the nation. Both measure development but in different ways and with different mediums. It can be said they are very similar and also very distinctive simultaneously.


Economic development can not be measured without measuring Economic growth but Economic growth need not depend on Economic development. Besides that, the economic calendar can be deployed for measuring both simultaneously.  

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