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Explain in short the indicators of economic development.

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Indicators of development:

  • A numerical value that shows the progress that acountry has made in areas such as health, education, gender equality, etc. Bvknown as an indicator of development.
  • These indicators work as measuring rod or standards to understand whether a country has made progress or not and if yes then how far.
  • These indicators which measure the rate of economic development and its extent can be presented in numerical and statistical terms.

Few of the indicators of development are discussed below:

1. National income:

National income as an indicator of development says that a country is said to have attained economic development if there is a continuous increase in the real national income of the country for a long period of time.

  • According to this indicator if the rate of rise in national income is high the development rate is said to be high and if the rate in rise of national income is slow, the rate of development is low.
  • Moreover, if the national income does not rise it means that the country’s development is stagnant whereas if national income decreases, it indicates that there is underdevelopment or negative development.
  • For calculating this indicator ‘real income’ and not ‘money (nominal) income’ is taken into consideration. As a result, national income is calculated not at current prices but at constant prices.

2. Per capita income:

  • The figure obtained by dividing gross national income of a country with the total population is called per capita income. In other words, per capita income is the average income per head.
  • As can be seen in the definition ‘per capita income’ takes into consideration the population also. Hence, this indicator of development is superior to the ‘national income’ as an indicator.
  • According to this indicator, when the per capita income of a country increases for a long period continuously, it can be said that economic development has taken place.
  • UNO (United Nations Organization) has recommended per capita income as an indicator of economic development.
  • If per capita income is high and if its rate of growth is also high then we can say that development has taken place.
  • If the county’s per capita income rises at a faster rate, development is said to fast. If per capita income grows at a slow rate, development is slow. If per capita income is constant there is stagnation and if per capita income falls, development is negative.
  • The ultimate objective of economic development is to improve the standard of living of the people and to raise the human development. Per capita income is one of the best indicators in accomplishing this task.
  • When we say development has taken place we mean that standard of living of the people has improved. If this has not improved then we cannot say that development has taken place in real sense.
  • Now, rise in per capita income improves physical welfare of an individual and hence it is the real indicator of economic development.

3. Physical Quality Life Index (PQLI):

1. Increase in national income and per capita income has a number of limitations. Hence, these two are not the real indicators of economic development.

2. If the income of the country has increased but if the rise is seen only by a limited class of people then it cannot be termed as development.

3. The development of a country should be such that the living standards of the poor rise and the basic requirements of the citizens are fulfilled.

4. Keeping these things in mind Morris Davis Morris developed the Physical Quality of Life Index (PQLI).

5. PQLI attempts to measure the quality of life or well-being of a country.

6. This index refers betterment of physical quality of life of human beings as economic development.

7. In order to derive the index of PQLI, the level of physical quality of life i.e. PQL is determined through various indicators.

8. If a country’s physical quality of life is higher than that of the other country, then that country is considered as more developed.

9. Morris included three indicators or say determinants for measuring the physical quality of life. These three determinants are

  1. Literacy,
  2. Life expectancy and
  3. Infant mortality rate.

Thus, PQLI = Literacy level + Life expectancy index + Infant mortality index.

4. Human Develooment Index:

  • The most recent indicator of development is the Human Development Index.
  • When United Nations Development Programme (UNDP) presented the Human Development Report (HDR) in 1990 it also introduced Human Development Index as a measure of development.
  • HDI emphasizes on both economic as well as non-economic measures.
  • Indian economists have also made a major contribution in preparing HDI.
  • The index is prepared by calculating the efforts made by each country for country’s development.
  • Improvements were introduced in the year 2010 in the minimum and maximum values of HDI. Since then the new values were used to measure HDI.

Determinants of Human Development Index:

  • To keep things simple, HDI is prepared using three factors namely,
    1. Life expectancy,
    2. Education and
    3. Income.
  • Life expectancy refers to the expected number of years a child will live at the time of birth, data on education depicts social achievements whereas income data depicts the standard of living.
  • Note that while calculating HDI instead of considering absolute values, average of all the three values is measured.

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