Santosh Naiker-Mo.

8155079728 XII-GSEB-ECO-CH-2
CHAPTER- 2
INDICATORS OF GROWTH & DEVELOPMENT
Topics:

2.1 Meaning of Economic Growth

It depicts growth rate of national income or quantum increase in the production of
products and service.
2.1.1 Definitions
2.1.2 Limitations of the Concept ofEconomic Growth
2.2 Meaning of Economic Development
Economic Development is a multidimensional process.
2.2.1 Definitions
2.2.2 Characteristics of EconomicDevelopment
2.2.3 Limitations of the Concept ofEconomic Development
2.3 Difference between Growth andDevelopment
2.4 Indicators of Development
2.4.1 Growth Rate of National Income
2.4.1.1 Tabular Expression
2.4.1.2 Limitations
2.4.2 Growth Rate of per Capita Income
2.4.2.1 Tabular Expression
2.4.2.2 Limitations
2.4.3 Improvement in Quality of Life andPQLI
2.4.3.1 What is Physical Quality ofLife?
2.4.3.2 Aspects which are Includedin the Physical Quality of Life
2.4.3.3 Physical Quality Life Index= PQLI
2.4.3.4 Physical Quality of Life - 3Factors (Determinants)
2.4.3.5 Reasons for only ThreeDeterminants
2.4.3.6 Formulation of PhysicalQuality of Life Index
2.4.3.7 Important Aspects
2.4.3.8 Positive Aspects
2.4.3.9 Limitations
2.4.3.10 Present Scenario
2.4.4 Human Development Index - HDI
2.4.4.1 Determinants of HumanDevelopment Index
2.4.4.2 Important Aspects
2.4.4.3 Human DevelopmentIndicators for SomeCountries of the World,HDR-
2015
2.4.4.4 Derived Conclusions
2.4.4.5 Importance of HumanDevelopment Index
2.4.4.6 Limitations

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(1) Development is a multi dimensional process. Who has given this statement?
(a) Todaro (b) Kindleberger (c) Marshall (d) Machlup

(2) Which concept is qualitative?

(a) National Income growth rate (b) Per capita Income growth rate
(c) Economic growth (d) Economic development

(3) What was India's ranking in the world according to the Human Development
Index in 2014?
(a) 127 (b) 128 (c) 129 (d) 130

(4) What was the per capita income of India in US dollars according to the
Human Development Report of 2014?
(a) 7110 (b) 7068 (c) 480 (d) 5497

(5) When economic development takes place in a country

(a) Contribution of agricultural sector decreases.
(b) Contribution of agricultural sector increases.
(c) Contribution of industrial sector decreases.
(d) Contribution of service sector decreases.

(6) What is the maximum value of Physical Quality of Life Index (PQLI)
(a) less than 100 (b) more than 100 (c) 100 (d) zero

(7) What is the value of Human Development Index?

(a) 0 (b) 1 (c) between 0 & 1 (d) 100

(8) Generally which countries are related with the concept of economic growth?
(a) Developed (b)Developing (c) Backward countries (d) Third world countries

(9) Economic development is the ...... of economic growth.

(a) cause (b) result (c) Means (d) end

(10) ...... was first in Human Development Index according to 2014 report.
(a) Japan (b) Norway (c) America (d) India

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(1) What is Economic growth?

Ans.It depicts growth rate of national income or quantum increase in the production
of products and services.

(2) Give the meaning of Economic development?

Ans. The term economic development has a very wide meaning which includes
economic growth, economic welfare and economic progress.

(3) What is per capita income?

Ans.Per capita income is average income per head. Per capita income is gross
national income of a country divided by the population of that country.

(4) Why is per capita as an indicator is more effective than national

income as an indicator?
Ans.Per capita income is gross national income of a country divided by the
population of that country. This indicator takes into account the population of
the country too, and hence per capita income as an indicator is superior to the
national income as an indicator.

(5) Which economist presented the Physical quality of life index?

Ans.Morris Davis Morris presented the physical quality of life index.

(6) How many countries were included in the HDI of 2014?

Ans.188 Countries were included in the HDI of 2014.

(7) Which factors are included in the Human Development Index?

Ans.Three factors alone are considered while preparing HDI to make it simple and
easy. (1) Life expectancy(2) Knowledge (3) Good Standard of Living .

(8) What is Infant mortality rate?

Ans.For every 1000 live births in one year, how many infants die before completing
one year is known as infant mortality rate?

(9) State the maximum value in Human Development Index.

Ans.The maximum value of HDI is 1.

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(10) What does high per capita income indicate
Ans.High per capita income indicate rate of growth high,it can be said that
development has taken place.

SECTION-C

ANSWER IN SHORT
(1) State the limitations of National Income as an indicator.
Ans.There are some limitations in acceptingnational income as an indicator of
economic development. Theyare as follows :
(1) Difficulty in Calculating the True National Income : The following points
make it difficult to know the true national income.
 Double counting, products for selfconsumption
 difficulties in calculating depreciation
 illegal income
 tax avoidance
 tax evasion
 barter transaction
 illiteracy
 employment of persons in more than one occupation etc.

(2) Population:
 National income is not an indicator of development.
 We have to know the extentof population.
 If therate of growth of national income is lesser than the rate of growth of
population, then there is very less development.

(3) Different Methods of Calculating National Income :

 There are different methods usedto calculate national income across the
world.
 The most important among them are production,income and expenditure
methods.
 When a country's national income is measured through twodifferent
methods, we get different results.

(2) State the limitations of per capital income as an indicator.

Ans.Per capita income as an indicator has following limitations :

(1) Only Estimates :

 The population of the country is not calculated every year. InIndia
population census is taken once in 10 years.
 Hence, only an approximation is taken for all otheryears. So per capita
income data is not acquired correctly.
(2) Difficulty in the Calculation of National Income and per Capita Income :

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 Just like national income,
 In the same way whether per capitaincome should be at current price
or constant price make it difficult toknow the real situation.

(3) Per Capita Income Shows only an Average :

 Per capita income shows only an averageincome.
 On the basis of this average, no decision can be taken and the stage of
development ofcountries cannot be decided.
(4) Difficulty in Comparison :
 The per capita incomes of different countries are expressed inheir
respective currencies.
 It will have to be first converted into US $ and then comparison canbe
done to find out whether economic development of a country is
relatively high or low.
 Differentcountries of the world impose different controls on the
exchange rate and real exchange ratecannot be known and
consequently the real comparison is not possible amongst countries.
(5) Per capita income of the country is not actual income that a citizen gets. Per
capita incomeas an indicator hides more than it reveals and hence it is not a
correct indicator.

(3) Where do the quantitative and qualitative changes occur?

Ans.In Economic Development Quantitative and Qualitative Changes occurs.

(4) What type of change is rise in production?

Ans. Quantitative Change is rise in production.

(5) What are the various indicators of Economic development?

Ans. The various Indicators of Economic Development are as follows:-
(1) Rate of growth of national income
(2) Rate of growth of per capita income
(3) Quality of life Physical quality of life index (PQLI)
(4) Human Development Index (HDI)

(6) State the limitations of Economic growth.

Ans.Limitations of theEconomic Growth:
(1) Economic growth takes into consideration only the quantitative change.
(2) In Economic growth, there is a rise in national income and per capita
income butinstitutional and psychological factors remain as before.
(3) The concept of economic growth is narrow and depicts only the rise in the rate
and extent of output.
(4) The concept of economic growth is not of much use in understanding the welfare
of the people.

(7) State the limitations of development.

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Ans. Limitations ofthe EconomicDevelopment:
(1) Economic development indicates the progress of a nation. It show the economic
scenario but in real sense, it cannot discuss the human development. It cannot
become the index of humanprogress.
(2) Economic development cannot be measured as economic growth. It is a very
difficult to measure economic development. Economic development includes
those changes that have happenedin the society. It is very difficult to derive a
measurement for this.
(3) When economic development takes place, the standard of living of people
improves.Though economic development is taking place in India today, there is
not much improvement in thestandard of living of the people and therefore we
cannot say that economic development meansimprovement in standard of living.

(8) What is life expectancy at birth?

Ans.What is the expected number of years a person will live at the time of birth of
the population of acountry determines thevalue. If it is less than50 years, that
country is said to be deficient in health.Higher the life expectancybetter the
HDI.

(9) Between growth and development, which one is difficult to measure ?

Why ?
Ans. Economic development cannot be measured as economic growth. It is a very
difficult tomeasure economic development. Economic development includes
those changes that have happenedin the society. It is very difficult to derive a
measurement for this.

(10) Sanitation facility indicates which aspect of improvement?

Ans. Sanitation facility indicates the Good Standard of Living improvement.

(1) What is Physical Quality of Life? What are the aspects included in it ?
Ans.Consumption standards and standard of living isknown as Physical Quality of
life Index.The composition ofgoods and services consumed by an individual
during a period of one year determines the physicalquality of life. The following
are determinants included in the list of goods and services :
(1) Food (Calories, proteins - fats) proportion
(2) Health and medical services (of doctor to population)
(3) Housing and clothing (number of houses, average number of people living in each
house)
(4) Education and entertainment (percentage of population getting primary
secondary education, TV, theatre etc.)
(5) Transport, communication and information services (the extent of road,

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railway lines, number of telephones per capita)
(6) Energy (per capita energy consumption)
(7) Population having access to pure drinking water
(8) Average life expectancy
(9) Infant mortality rate
(10) Drainage facility

(2) Discuss national income as an indicator of economic development.

Ans. A country is said to have attained economic development if there is acontinuous
increase in the real national income of the country for a long period of time. If the
rate ofrise innational income is high the development rate is said to be high and if
national incomeincreasesat a lower rate, the rate of development is low. If the
national income does not rise it depicts the stateof stagnancy and if national
income decreases, there is underdevelopment or negative development.

(3) Explain per capita income as an indicator of economic development.

Ans. When the per capita income of a country increases for a long period
continuously, it can be said that economic development has taken place. Per
capita incomeis average income per head. Per capita income is gross national
income of a country divided bythe population of that country. This indicator
takes into account the population of the country too,and hence per capita
income as an indicator is superior to the national income as an indicator. The
experts of UNO (United Nations Organisation) have recommended per capita
income as anindicator of economic development.

(4) Explain in brief, the limitations of Physical Quality of Life Index.

Ans. Limitations of Physical Quality of Life Index :
(1) Only 3 aspects are included and on their basis it cannot be categorically stated,
whether acountry has actually developed or not. To get a correct picture we need
to include other factorsalso to the existing ones.
(2) Only averages are depicted - The values obtained from three indicators are
divided by 3 to obtain PQLI which is in the form of average. Average of three
aspects of a country does notshow the prominence or backwardness of each
indicator. Decisions cannot be made on the basisof averages.
(3) If a country's present PQLI is high, it cannot be generalized that the
economic development is high as against other countries.
(4) It is not right to give equal weightage (100) to all indicators. All three aspects do
not havesame importance in human life.
(5) Growth of income has high importance in physical quality of life index and

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ignoring that isnot possible.
(6) The PQLI of rich countries rise at a slower rate because average life cannot
increase beyond a particular limit.

(5) At present, India is growing or developing or both. Give answer by

stating reasons.
Ans. At present , India is growing and developing both . As day by day India is
developing faster rate. As compared to country like Norway and America its PQLI
is less but other than that it is growing compared to other countries in world.

(1) Explain with the help of examples, the difference between

economic growth and economic development.
Ans.

Economic Development Economic Growth

(1) Economic Development is a process. (1) Economic growth is an occurrence.

(2) In Economic development quantitative (2)In Economic growth quantitative

and qualitative changes take place. change occur.

(3 In Economic development the question (3) In Economic growth, emphasis is on

of utilisation of unutilised resources arises the distribution of available resources.

(4) The concept of Economic development (4)Economic growth is related to

is related to developing countries. developed
countries.

(5) Economic development is difficult (5) It is easy to measure economic

to measure. growth.

(6) The concept of development is broad. (6) The concept of growth is narrow.

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(7) Economic development is related to (7) Economic growth is only related to

distribution along with per capita income increase in per capita income.

(8) Economic development is a slow (8) Economic growth is a rapid process.

process.
(9) Economic development is not possible (9)Economic growth is possible without
without economic growth. economic development.

(2) Explain an improvement in the Physical Quality of Life Index as an

indicator of economicdevelopment.
Ans.Keeping this in mind Morris Davis Morrispresented the physical quality of life
index which is in short known as PQLI. In this indexbetterment of physical
quality of life of human beings is considered as Economic development. Thelevel
of physical quality of life determines the level of economic development. If any
country'sphysical quality of life is higher than that of the other country, then
that country is considered asmore developed. There are three standards to
measure the physical quality which are depictedhere.
Physical Quality of Life - 3 Factors (Determinants) :

• EXTENT OF EDUCATION
• LIFE EXPECTANCY
• INFANT MORTALITY RATE
EXTENT OF EDUCATION LIFE EXPECTANCY INFANT MORTALITY
RATE

Literacy level of the country Number of years a child is The number of infants
who
determines situation of expected to live at the time die out of every 1000
infants

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education. The percentage of birth is known before completing their
first
of population educated out as life expectancy. It shows year is known as infant
of the total population the average life. If life mortality. If infant
mortality
determines the extent expectancy rises it can be rate falls, it can be said
that
of education said that the medical service health care services of
the
of the country is good. country is good.

PQLI = Literacy level + Life expectancy index + Infant mortality index

(3) What are the factors included in the human development index?
Explain them.
Ans.Three factors alone are considered while preparing HDI to make it simple and
easy. Instead of absolute values, average of all the three values are prepared : (1)
Life expectancy. (2) Educationalachievements (knowledge) data depicts social
achievements. (3) Income data depicts the standardof living which in turn shows
the economic achievements.

Life Expectancy Knowledge Good Standard of Living

What is expected number To know the quantum of Standard of living refers to
of years a person will live at knowledge adult literacy the availability of pure
the time of birth of the in percent is drinking water, medical
population of a countries calculated. People in the services, good sanitation,
determines the value. If it age group15 years and infant mortality rate
is less than 50 years, that above are included. percentage of
country is said to be Two aspects are included undernourished and
deficient in health. Higher in this (A) Number of malnourished children,
the life expectancy better years of schooling (B) per capita calorie
the HDI. Expected number of years availability per day,
of schooling. The gap mortality rate of infants
between expected and below 5 years of age,
actual number of years of protein and fat availability,
schooling is taken to etc. are considered which
derive the values. depends on income. Income
index is that in which per
capita gross national
income
ismeasuredonthebasisofPPP.
(PurchasingPowerParity)

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(4) Compare PQLI and HDI and show which indicator is superior? Why?
Ans. Explain HDI is more superior than PQLI ( write the benefits in ur own words to
compare the both).

(5) Explain in short the indicators of economic development.

Ans. The Indicators of Economic Development are as follows:-
1. Growth Rate of National Income
According to this indicator, a country is said to have attained economic
development if there is acontinuous increase in the real national income of the
country for a long period of time.
(A) Tabular Expression
Some countries have a fasterrate of growth of national income when
compared to the rate ofgrowth of national income and hence, such countries
are said tohave a higher rate of economic development.
(B) Limitations
Some Limitations are as follows:-
(1) Difficulty in Calculating the True National Income :
(2) Population :
(3) Different Methods of Calculating National Income :
2. Growth Rate of per Capita Income
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. Per capita income is average income per head.
(A)Tabular Expression
On the basis of purchasing power parity is 5,497 US $ which is lower than
Norway, U.S., China, Sri Lanka. Compared to Norway, India's per capita income
is 11to 12 times lesser and hence Norway's growth is said to be higher than
India's by 11 to 12 times.
(B) Limitations
(1) Only Estimates :
(2) Difficulty in the Calculation of National Income and per Capita Income :
(3) Per Capita Income Shows only an Average :
(4) Difficulty in Comparison :
3. Improvement in Quality of Life andPQLI
The objective of economic development is to improve the standard of living of the

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people. Forthat, if economic development has taken place, and how much more
or less is to be measured andfor this physical quality of life index as an indicator
is accepted.
(A) What is Physical Quality ofLife?
Quality of life in human beings depends on the different types of goods and
services that a person consumes. The standards of consumption referto the :
(B) Aspects which are Includedin the Physical Quality of Life :
The composition ofgoods and services consumed by an individual during a period
of one year determines the physicalquality of life.
(C) Physical Quality Life Index= PQLI
The development of a country should be such that the living standards of the
poor rise. The basic requirements of the citizens are fulfilled.
(D) Physical Quality of Life - 3Factors (Determinants)
(1) Extent of Education
(2) Life Expectancy
(3) Infant Mortality Rate
(E) Reasons for only ThreeDeterminants
(1) Dependable data for all these factors can be acquired for all the countries
(2) All these three factors (determinants) depict the results and not efforts.
(3) All these three factors are product based and hence fulfils the
justifiablestandards forperformance comparison.
(F) Formulation of PhysicalQuality of Life Index
(G) Important Aspect
(H) Positive Aspects
(I) Limitations
(J) Present Scenario
4. Human Development Index - HDI
The most recent indicator of development is the Human Development Index.
United Nations Development Programme (UNDP) presented the Human
Development Report (HDR) in 1990.
(A) Determinants of HumanDevelopment Index
average of all the three values are prepared : (1) Life expectancy. (2) Educational
achievements (knowledge) data depicts social achievements. (3) Income data
depicts the standardof living which in turn shows the economic achievements.
(B) Important Aspects
(C) Human DevelopmentIndicators for SomeCountries of the World,HDR-2015
(D) Derived Conclusions
(E) Importance of HumanDevelopment Index
(F) Limitations

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