The Difference Between Economic Growth and Economic Development & How To Measure Them

The Difference Between Economic Growth and Economic Development & How To Measure Them

Many people take economic growth and development to be one and the same but that is farther from the truth. What is economic growth and development? And how do they differ? Let’s find out.

Economic growth is an increase in the production of goods and services. It is commonly measured in terms of the increase in the aggregate market value of goods and services produced. Increased economic output requires increasing the number of goods and services and also making efficient use of labor, capital, and raw materials.

The difference between Economic Growth and Development?

“Economic growth” means growth in real national income/ Gross Domestic Product (GDP) whereas “Development” means an improvement in the standard of living e.g. health care facilities, educational infrastructure, and quality of life, etc.

Worldwide countries began to focus on development beginning in the second half of the twentieth century. An understanding developed that economic growth did not necessarily lead to a rise in the level and quality of life for people all over the world; there was a need to place an emphasis on specific policies that would channel resources and enable social and economic mobility.

Development looks at how people are living, and how easily they can fulfill their needs. It mainly gives a clear insight into how the standard of living has improved over a period of time.

Human Development Index

Human Development Index is a statistical index that represents the human development or living standard of a country or a region. It accounts for factors like life expectancy, education, and per capita income. If a country has a high HDI ranking it means that all these three factors are increasing.

The highest HDI values are recorded in countries like Norway (0.95), Switzerland (0.94), and Australia (0.94), and the lowest values are recorded in central Africa (Graph 1).


Metrics to Measure Development

There are many ways to measure development but the most prominent is the Human Development Index (HDI). The Human Development Index examines the two most important criteria

1. Life expectancy  The term life expectancy means the average number of years that a person is expected to live at birth. In rich countries such as Spain, Australia, Switzerland, and Italy average life expectancy was over 83 years in 2019. Whereas the population of the Central African Republic, a relatively poor region, had life expectancies of only 53 years.


2. Education  It is measured by expected years of schooling at school-entry age and means years of schooling of the adult population. Education has been an integral driver of human development.

Parameters to Measure Economic Growth

Economists have different ways of measuring it which are muddled up with various reasons and logic. One of the ways to measure economic growth is either by looking at the improvement in the standard of living or the increase in average income over a given period of time.

1. Measuring economic growth by tracking access to goods and services

One way of measuring economic growth is by looking at how a country is growing. Look around, everything we use for our daily living is now our basic necessity in some way or the other. In this way, we can keep a track of products we have access to over a while and how their availability has grown for a population.

Economic growth is directly linked with the availability of goods and services per head of the population. However, it has some drawbacks; it does not tell us anything about how these goods and services are distributed among the population.

2. Tracking the ratio of people’s income and price of particular goods and products

The invention of new technologies and industries has produced opportunities to earn a stable living standard for people and provided the population with a source of fixed income.

People earning monetary value for their labor gave them access to various needs and comforts of living. Comparing the ratio of people’s income and the expenditure on their basic needs and comforts can give an appropriate measurement of economic growth.
If the average income of the population is high and the cost of their living is low, it signifies that economically those countries or regions are moving towards a better future.

Top 25 countries in terms of GDP in 2020

Tracking GDP per Capita

GDP per capita is a prominent metric to assess the living standard of people in a given country. Economists use this method to analyze the productivity of countries.

It is one of the most reliable methods to measure economic growth.  This process can also help us get an insight into people’s contributions to the economic growth of a country.

Countries such as the United States, Saudi Arabia, and Canada have higher GDP per capita as compared to countries like Brazil, Mexico, and India (Graph 3).


GDP per capita focuses on the productivity of nations. Countries that have higher productivity will have a higher GDP per capita or average income. For eg. in the USA, the average person earns over $55,000 annually. In contrast, an average Indian earns just over $6000 per year.

The views expressed in this article are those of the author alone and not the WorldRef.

At Worldref, we understand the terms “economic growth” and “economic development” are often used interchangeably.

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