Economic Development: Features of Economic Development

The study of economic development is one of the latest and most enterprising branches of economics. It came into lime light after the Great Depression and Second World War.

Precisely speaking, it is not easy to give definition of economic development in a precise way because different criteria have been used in making distinction between developed and under-developed nations.

According to Prof. Meier and Baldwin, “Economic Development is a process, whereby, economy’s real national income increases over a long period of time”.

Meaning:

This definition is simple as well as precise. It emphasizes three basic features of economic development:

(а) Economic development is a process.

(b) The process results in the rise in ‘real national income’.

(c) Real Income must be sustained over a ‘long period of time’.

(а) Process:

In the definition, process means the operation of certain forces which brings continuous change in the economic system.

These forces are:

(i) Changes in basic factor supplies:

It includes the discovery of additional resources. Capital accumulation, population growth, improvement in the technique of production, improvements in skills and other institutional and organisational changes.

(ii) Changes in the structure of demand for products:

It includes size and composition of population, level and distribution of incomes, taste and other institutional changes. So collectively changes in ‘Factor supplies’ and ‘Structure of demand’ result in the growth of real national income.

(b) Real national Income:

It refers to the country’s total output of final goods and services mentioned not in money terms but in real terms (i.e. in terms of goods & services). National income might refers to the gross national product or Net national Product. As gross national product provides no provision for capital replacements (Depreciation), a better measure is net national product. Real national income refers to net national product corrected for price changes.

(c) Increase in net national product must be sustained one:

Net National product must be sustained for long period and not for short period. A short period expansion which occurs within a business cycle is of secondary results. The important is the long run upward trend in real national income. It is called economic development.

Broadly speaking the process of sustained increase in real national income over a long period of time is called economic development. If the rate of development is greater than the rate of population growth, then per capita real income will increase.