INTRODUCTION

The Indian economy has accumulated development experience spanning a little over six decades. There are some deep changes that have taken place in India, which suggest that the economy’s fundamentals are strong. First, the current rate of savings and investment have reached levels that even ten years ago would have been dismissed as a pipedream for India. On this important dimension, India is now completely a part of the world’s fast-growing economies. Since these indicators are some of the strongest correlates of growth and do not fluctuate wildly, they speak very well for India’s medium-term growth prospects. It also has to be kept in mind that as the demographic dividend begins to pay off in India, with the working age-group population rising disproportionately over the next two decades, the savings rate is likely to rise further. Second, the arrival of India’s corporations in the global market place and informal indicators of the sophisticated corporate culture that many of these companies exhibit also land to the optimistic prognosis for the economy in the medium to long run.

There are certain critical lessons to be learnt from the sixty years of development experience.

1. Macro-economic stability is an essential prerequisite for achieving the growth needed for development.
2.   Growth does not trickle down; development must address human needs directly.
3. No one policy will trigger development – a comprehensive approach is needed.
4.  Institutions matter, sustained development should be rooted in processes that are socially inclusive and responsive to changing circumstances.

MEANINGAND MEASUREMENT OF ECONOMIC DEVELOPMENT

 ‘Development’ Distinguished from ‘Growth’

 Traditional View

 Traditionally, economic development has been considered as synonymous with economic growth. Economic growth has been defined as “an increase in real terms of the output of goods and services that is sustained over a long period of time, measured in terms of value added.”

Modern View

 The modern economists, however, have begin to question this identity between ‘economic growth’ and ‘economic development’; “development is not the same thing as economic growth”. Suppose, by analogy, we were interested in the difference between ‘growth’ and ‘development’ in human beings. Growth involves changes in overall aggregates such as height or weight, while development includes changes in functional capacities, physical coordination, leadership capacity, of ability to adapt to changing circumstances. Growth is an engine, not an end in itself. The end being development

Concept of Economic Development

 In view of the above considerations, economic development, now, is being defined “as the process of increasing the degree of utilisation and improving the productivity of the available resources of a country which leads to an increase of the economic welfare of the community by stimulating the growth of national income.”country which leads to an increase of the economic welfare of the community by stimulating the growth of national income.”

Economic Growth = Size of output (A Quantitative aspect)

 Economic Development = Size of Output + Economic Welfare (A Qualitative aspect)

If follows from this definition that the progress of development has to be assessed by reference to two separate indicators, namely, the indices of ‘production’ or ‘national income’, and of the ‘economic welfare’ of the community.

1) The former covers what may be designed as the ‘growth’ aspect of development.

 2) The economic welfare indicator, on the other hand, brings to light the pattern of allocation of resources and of the distribution of income among different groups and classes of the community; in a sense, it combines the ‘equity’ and the ‘growth’ aspects of development.

It follows that in pursuit of economic development, the following five types of

growth processes should be avoided:

i) Jobless growth, implying a growth process which does not create additional

jobs or which reduces the existing job opportunities;

ii) Ruthless growth, implying a growth profile which aggravates inequalities in the

system;

iii) Futureless growth, implying a growth paradigm which creates non-sustainability

through environmental degradation;

iv) Voiceless growth, implying a growth process which does not improve the

income of the deprived sections of the society; and

v) Rootless growth, implying a growth process which destroys the cultural roots

and traditional life styles of the society.

Economic Development and Structural Change

Econometricians have attempted to measure structural changes in economies as development proceeds. Much of the pioneering work was done by Prof. Simon Kuznets on the basis of historical data, and the analysis has been extended and 9 refined using current data, notably under the leadership of Hollis Chenery. Such studies seek to reveal how key economic parameters change as countries develop. We may note the following as important changes:

1. Constituents of GDP Change More generally, in terms of percentage shares, saving rates increase as income grows; government revenues (and expenditure) increase, food consumption drops and non-food consumption increases, relative output of services – and, of course, also industry – increases, while agriculture falls.
2.  Employment Changes Employment changes reflect the shift in output and changes in productivity. Labour in the primary sector of the economy does not fall as rapidly as its share in output; the reverse is true for employment in industry where increase in labour productivity is more easily secured.
3. Shift in the Composition of Exports As development proceeds and the economy increasingly gets opened to the restof the world, exports will account for a larger proportion of incomes and there will have been a marked shift in the composition of exports, so that the value of export of manufactures rises relative to that of primary products. Imports will also have risen and earnings and payments will be roughly balanced.
4.  Rate of Increase in Population As incomes increase, the rate of increase in population may be expected to fall, as the birth rate declines along with a fall in the death rate. The population would still be increasing, but gradually the rate of growth will tend to peter out.
5.  Distribution of Income Income would at first become more unequally distributed and then this trend would be reversed. Equity influences development in two ways: inequalities of power and wealth result in waste and inefficient use of productive resources, and impair institutional development. Unequal power also impedes innovation and risktaking.