The paper "India’ s Global Competitive Index" is a great example of a macro and microeconomics case study. Economic growth is a measure of an increase in the real Gross Domestic Output or real output. GDP is used as the measure of national output as well as national expenditure. GDP measures an economy’ s total volume of goods and services produced in a specified period. On the other hand, economic development transcends increase in the real output, looking into a wider range of statistics. Economic development is concerned with how various economic factors affect people’ s quality of life.
Economic development tries to explore deeper to give an analysis of people’ s actual living standards as well as the freedom these people have in enjoying a good living standard. Measuring economic development is not as precise as it is with economic growth which depends on GDP statistics. Several measures of economic development are used such as the Human Development Index (HDI). Most of these measures look at life expectancy, the levels of environmental standards, levels of health care, real income per head, levels of education standards and literacy and quality and availability of housing.
It is, therefore, possible to have economic growth without economic development. This is true because there may be an increase in GDP but no improvement in the living standards of most individuals in an economy. Some of the factors that may lead to this phenomenon are when economic growth benefits only a small percentage of the population, where a country is faced with issues of corruption or a country that produces toxic chemicals that may fetch high returns but on the other side lead to environmental and health problems. According to Whitman Rostow, economic development happens in five phases (Aoki, 2011 pg 2).
The first phase of economic development is known as the traditional society where the economy is supported by subsistence activity. The second phase of economic development is known as the preconditions for take-off. In this stage, there is increased specialization generating surplus thus shifting trade to another level. The third and most important phase is known as the take-off stage. This stage marks an industrial revolution where industrialization increases, worker switching to the manufacturing sector from the agricultural sector.
Drive to maturity marks the fourth phase of economic development. At this stage, the economy is diversifying into new areas with an increase in technological innovation which offers a diverse platform for a range of investment opportunities. The fifth and last stage of economic development is the phase of High Mass Consumption. At this stage consumer, durable industries flourish with the service sector becoming increasingly dominant (Aoki, 2011 pg 3). Competitiveness is the set of policies, institutions and factors that determine a nation’ s level of productivity.
It is this level of productivity of an economy that sets the possible national level of prosperity. Measures of the level of productivity of any nation are used to determine the expected rate of return on investment investors obtain. This marks the foundational drivers of an economy’ s growth rates. An economy is said to be more competitive if it is likely to grow faster over time (Delgado, 2012 pg 8). Economic growth on the other side entails an increase in a country’ s real output. There is a causal link between the increase in the nation’ s real output which determines economic growth and increases in productivity that place an economy is higher in the competitive index.
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