Economic Growth and Development: Concepts and Measurement
Often the terms economic growth and economic development are used interchangeably as if they were synonymous, but there is a big distinction between them. Economic growth refers to the increase in an economy's real gross domestic product (GDP) and income over time. Real GDP is the economy's total output of goods and services, usually measured over a period of one year. The amount of achievable economic growth would depend on the human resource acquisition of the economy, technological improvement, amount of capital investment, natural resource endowment and degree of its exploitation, and the managerial know-how existing in the economy.
Economic development, however, must be preceded and prompted by economic growth. To reflect economic development, economic growth is defined in terms of increases in per capita real output or per capita income. Development encompasses the process through which societies, or nations, or regions, raise their per capita output and income by improvements and increases in productivity, and how these translate into per capita economic well-being in the society. 1 Economic development involves economic growth accompanied by structural transformation, that is, economic growth plus (positive) structural changes in the economy. Thus, economic growth may be seen as necessary, but not sufficient, for economic development. Structural transformation provides the sufficiency condition for economic development. We now examine in turn, these two conditions of economic growth and structural change, to enable us to provide a complete and precise understanding of economic development.
Economic growth may be regarded as a steady increase in national income and per capita income of the society over time. Before we move to consider practical quantifications and measurement of economic growth, it will be helpful