Economic development implies more, particularly improvements in health, education and other aspects of human welfare. Countries that increase their income but do not also raise life expectancy, reduce infant mortality, and increase literacy rates are missing out of some important aspects of development.

The economic development of a country is defined as the development of the economic wealth of the country. Economic development is aimed at the overall well-being of the citizens of a country, as they are the ultimate beneficiaries of the development of the economy of their country.

Economic development is a sustainable boost in the standards of living of the people of a country. It implies an increase in the per capita income of every citizen. It also leads to the creation of more opportunities in the sectors of education, healthcare, employment and the conservation of the environment.

Economic growth refers to a rise in national or per capita income and product. If a production of goods and services in a country rises, by weather means and along with it average income increases, the country has achieved economic growth.


Economic growth can be either positive or negative. Negative growth can be referred to by saying that the economy is shrinking. Negative growth is associated with economic recession and economic depression.

Economic growth on the other hand, is a narrower concept than economic development. It is defined as the increase in the value of goods and services produced by every sector of the economy. It is usually expressed in terms of the gross domestic product or GDP of the country. Economic growth is defined by increases in GDP.

Whereas, economic development is more of a vague measure usually incorporating social measures such as literacy rates or life expectancy as a means of measuring a country’s level of development.

Economists often tend to use the two terms economic development and economic growth interchangeably, as they appear to be synonymous with each other. Economic growth is defined by increases in GDP.


Whereas, economic development is more of a vague measure usually incorporating social measures such as literacy rates or life expectancy a means of measuring a country’s level of development.

Economic development is a qualitative measure while economic growth is a quantitative measure. Economists have been trying to identify alternative measures of economic development which should reflect in a true manner the changes in the standard of living.

Poverty-Weighted Index of Social Welfare:

The use of GNP as a method of comparing welfare or as a method of comparing the development performance of different countries can be misleading. This is especially so when different countries have varied distributions of income.


The population is grouped into quintiles of four individuals each. The first quintile represents the bottom 20% of the population on the income scale. This group of individuals receives only 5 per cent of the national income; the second quintile receives 9 per cent, and so on.

The rate of income growth in each quintile is a measure of economic welfare growth of that class. The total welfare of society is measured as the simple weighted sum of the growth of income in each class and is expressed as under:

It means that the GNP would rise by 7.3% even if there is zero change in the incomes of the 60 per cent population at the bottom of the income ladder.

To remove this anomaly and to make GNP estimates a better representative of the society’s welfare, an alternative measure based on equal weights or poverty- weighted index has been evolved.


Equal-Weights Index assigns equal weights to growth of income in each income class. All people are treated equally.

The economy has been divided into quintiles; equal-weight index would give a weight of 0.2 to the growth in income in each quintile using equal- weight index in our example of 10% income growth of the top two quintiles with bottom three quintiles showing no change, we would have

The equal-weight index shows that social welfare has increased by 4% as compared to 7.3% increase shown earlier.

The use of poverty-weighted index shows that there is no improvement in the social well-being of the bottom 40% of the population. The GNP growth records 7.3% improvement in the social welfare.


In short, a useful summary of the degree to which economic growth is based towards relative improvement of high-income or low-income groups is the positive or negative divergence between a weighted social welfare index and the actual growth rate of GNP.