Economic growth : Focuses on the quantity of a country’s output, such as national income or GDP. GDP is computed by aggregating the money spent by consumers, businesses, and the government during a certain period.
Economic development : The quality of life for a country’s population is prioritized, with advances in health, education, and working circumstances. Qualitative indicators of economic growth include the Human growth Index (HDI), gender-related index, and infant mortality rates.
Problem with the concept of GDP
- GDP does not measure the overall quality of living or well-being of a country.
- GDP counts goods as well as bad. When an earthquake hits and requires rebuilding, GDP increases. When someone gets sick and money is spent on their care, it is counted as a part of the GDP. But nobody would agree that we are better off because of destructive earthquakes or people getting sick.
- GDP is not adjusted for pollution cost. If the two economies have the same GDP per capita but one has polluted air and water while the other does not, well-being will be different but GDP per capita will not capture it.
- GDP is not providing any information about environmental degradation and resource depletion.
- GDP tells hardly anything about sustainability.
- The quality of life may also depend upon the distribution of GDP among the residents of a country, not just the overall level.
ICOR (Incremental Capital Output Ratio)
- The incremental capital-output ratio is the amount of capital required to produce 1 unit of output.
- The higher the ICOR, the less efficient we are in the usage of capital.
- The Harrod Domar model puts it, the growth rate is equal to the investment rate divided by the ICOR.
- ICOR measures the capital intensity and efficiency and it also depends upon the following:
- The choice of industries: For heavy industries like steel, cement, aluminum etc, the ICOR will be higher.
- Time and cost overrun will increase ICOR (As per a recent report of the Ministry of Statistics and Programme Implementation (MoSPI) there is a total extra amount of money spent on delayed projects is rupees 4.3 lakh crores.)
- Technology also affects the ICOR. For example: Efficient technology will lead to lesser ICOR and inefficient technology lead to more ICOR.
Net disposable income : The earned income left after the tax deduction is net disposable income.
➤ From this net disposable income whatever amount of money, you need for basic things like food, shelter, and dress is subtracted and the remaining money is our discretionary income.
Potential GDP : It is an estimate of the value of the output that the economy would have produced if labor and capital had been employed at their maximum sustainable rates, that is, rates that are consistent with steady growth and stable inflation.
Green GDP
Green GDP takes into account estimates for environmental degradation, depletion of natural resources, and savings of resources and environment into the national income accounts.
➤ Green GDP = GDP- Cost of resources – Cost of environment + Savings of resources and environment.
Natural resource depletion cost
- Cultivated land depletion value
- Forest resource depletion value
- Water resource depletion value
- Energy consumption value
- Mineral resource depletion value
Environmental quality degradation cost
- Air pollution
- Water pollution
- Solid waste pollution
- Natural disaster loss
India’s Rank in Certain Indexes at Global Level
1. World Happiness Report 2022
- India is at 126th Place out of 149 countries .
- The World Happiness Report is an annual publication of the United Nations Sustainable Development Solutions Network.
- India is at 139th Place in the index of 149 Countries in 2021 and in 2022 it is 136th.
- Finland is the happiest country in the world. Denmark, Iceland and the sweden hold the next top positions in the top 10.
2. Social Progress Index 2022
- The Social Progress Index (SPI) measures the extent to which countries provide for the social and environmental needs of their citizens.
- Fifty-One indicators in the areas of basic human needs, foundations of well-being, and opportunity to progress show the relative performance of nations.
- The index is published by the nonprofit Social Progress Imperative, and is based on the writings of Amartya Sen, Douglass North, and Joseph Stiglitz.
- India’s rank is 117 (it was 102 in 2019) with low social progress with a score of 56.8/100 in 2020.
- In 2022, India’s rank is 110 and the score is 60.19.
3. Legatum Prosperity Index 2021
- The Legatum Prosperity Index is an annual ranking developed by the Legatum Institute, a division of the private investment firm Legatum.
- The ranking is based on a variety of factors including wealth, economic growth, education, health, personal well-being, and quality of life.
- India ranked 101st out of 167 countries (Last Year India ranked 101) (in safety and Security 139th Place, Natural Environment- 160th, Personal freedom 106th, but yes when it comes to Enterprise Condition, we are at 51st Place).
4. Global Hunger Index 2022
- Global Hunger Index developed by the International Food Policy Research Institute (IFPRI).
- India ranks 107th out of 121 countries in the GHI 2022 rankings with a score of 29.1.
- Values from 0 to 9.9 reflect low hunger, values from 10.0 to 19.9 reflect moderate hunger, values from 20.0 to 34.9 indicate serious hunger, values from 35.0 to 49.9 reflect alarming hunger, and values of 50.0 or more reflect extremely alarming hunger levels.
- India is ranked behind most of its neighbouring countries. Their ranks are given below: Pakistan – 99 Sri Lanka64, Nepal -81, Bangladesh-84.
5. Human Development Index (HDI)
- The Human Development Index (HDI) is a statistical composite index of life expectancy, education, and per capita income indicators, which are used to rank countries into four tiers of human development.
- A country scores a higher HDI when the lifespan is higher, the education level is higher, and the gross national income GNI (PPP) per capita is higher.
- It was developed by Pakistani economist Mahbub ul Haq, with help from Gustav Ranis of Yale University and Meghnad Desai of the London School of Economics, and was further used to measure a country’s development by the United Nations Development Program (UNDP)’s Human Development Report Office.
- As for the year 2019, HDI for India stood at 0.645, which shows medium human development and Rank is 131 out of 189 countries
6. Corruption Perceptions Index 2020
- The Corruption Perceptions Index (CPI) is an index published annually by Berlin-based Transparency International since 1995 which ranks countries “by their perceived levels of public sector corruption, as determined by expert assessments and opinion surveys.
- If the score is 99-50, then the country is perceived as less corrupt, and 49-0, the country is perceived as more corrupt.
- Out of 179 countries, India is in 86th place with a score of 40 in 2020. India’s score was 36 in 2012. In 2021, the rank is 85 and the score is 40.
- Denmark and Finland are at 1st and 2nd place with a score of 88.
7. Global Peace Index 2021
- Global Peace Index (GPI) is a report produced by the Institute for Economics & Peace (IEP) that measures the relative position of nations’ and regions’ peacefulness.
- The GPI ranks 172 independent states and territories (collectively accounting for 99.7 per cent of the world’s population) according to their levels of peacefulness.
- India’s rank is 135 out of 163 nations in 2021. India’s rank was 141 out of 171 countries in 2019.
- The 2021 GPI indicates Iceland, New Zealand, Denmark, Portugal, Austria, Slovenia, and Denmark to be the most peaceful countries, and Afghanistan, Syria, Iraq, South Sudan, and Yemen to be the least peaceful.
8. Global Terrorism Index
- The Global Terrorism Index (GTI) is a report published annually by the Institute for Economics and Peace (IEP), and was developed by IT entrepreneur and IEP’s founder Steve Killelea .
- The index provides a comprehensive summary of the key global trends and patterns in terrorism since 2000.
- The GTI is based on data from the Global Terrorism Database (GTD) which is collected and collated by the National Consortium for the Study of Terrorism and Responses to Terrorism (START) at the University of Maryland. The GTD has codified over 190,000 cases of terrorism, it covers 163 countries, consisting 99.7% of the world’s population.
- If the score is 10-8 (Very high impact), 8-6 (High impact), 6-4 (Medium impact), 4-2 (Low impact), 2-0 (Very low impact), and 0 (No impact).
- India’s rank is in this index with a score of 7.353.