Economic Growth is a narrower concept than economic development.It is an increase in a country's real level of national output which can be caused by an increase in the quality of resources (by education etc.), increase in the quantity of resources & improvements in technology or in another way an increase in the value of goods and services produced by every sector of the economy. Economic Growth can be measured by an increase in a country's GDP (gross domestic product).

Economic development is a normative concept i.e. it applies in the context of people's sense of morality (right and wrong, good and bad). The definition of economic development given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice. The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affect productivity and could lead to Economic Growth. It also leads to the creation of more opportunities in the sectors of education, healthcare, employment and the conservation of the environment.It implies an increase in the per capita income of every citizen.

Economic Growth does not take into account the size of the informal economy. The informal economy is also known as the black economy which is unrecorded economic activity. Development alleviates people from low standards of living into proper employment with suitable shelter. Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion & disease. Development however is concerned with sustainability which means meeting the needs of the present without compromising future needs. These environmental effects are becoming more of a problem for Governments now that the pressure has increased on them due to Global warming.

Economic growth is a necessary but not sufficient condition of economic development.

Comparison chart

Economic Development versus Economic Growth comparison chart
Edit this comparison chartEconomic DevelopmentEconomic Growth
Implications Economic development implies an upward movement of the entire social system in terms of income, savings and investment along with progressive changes in socioeconomic structure of country (institutional and technological changes). Economic growth refers to an increase over time in a country`s real output of goods and services (GNP) or real output per capita income.
Factors Development relates to growth of human capital indexes, a decrease in inequality figures, and structural changes that improve the general population's quality of life. Growth relates to a gradual increase in one of the components of Gross Domestic Product: consumption, government spending, investment, net exports.
Measurement Qualitative.HDI (Human Development Index), gender- related index (GDI), Human poverty index (HPI), infant mortality, literacy rate etc. Quantitative. Increases in real GDP.
Effect Brings qualitative and quantitative changes in the economy Brings quantitative changes in the economy
Relevance Economic development is more relevant to measure progress and quality of life in developing nations. Economic growth is a more relevant metric for progress in developed countries. But it's widely used in all countries because growth is a necessary condition for development.
Scope Concerned with structural changes in the economy Growth is concerned with increase in the economy's output

Video Explaining the Differences

The Social Progress Imperative, which releases a Social Progress Index, was created out of the need to track both the economic and social opportunities of people and countries around the world. In the TED Talk below, SPI's CEO, Michael Green, discusses the importance of tracking economic development as well as economic growth, and how GDP dollars do not necessarily buy social progress, such as basic needs, happiness, and opportunity.


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