National Income and Economic Growth

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Presentation transcript:

National Income and Economic Growth

Economic Growth Economic growth may be defined as a rate of expansion that can move an underdeveloped country from a near subsistence mode of living to substantially higher levels in a comparatively short period of time.

Economic Growth Historically, rapid economic growth has been accompanied by greater industrialisation. More accurately the process of economic growth can be described in terms of greater commercialisation of economic activities.

Indicators of Economic Growth GDP/ GNP Per capita GDP/GNP Per capita GDP/GNP is most appropriate measure.

National Income The rate of growth of the national income in an economy is an indication of the pace at which the economy has been growing. A high national income indicates the economy is developed and the overall environment is favorable.

Growth of National Income in India National Income.doc

IMPORTANT N.I. INDICATORS Category Unit 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 GDP (Current Market Price) Rs. Crores 3239224 3706473 4283979 4947857 5574449QE 6164178 Growth Rate % - 14.4 15.6 15.5 12.7 10.6 GDP (factor cost 2004-05 prices) 2967599 3249130 3564627 3893457 4154973 4453064 9.5 9.7 9.2 6.7 7.2 Saving Rate % of GDP 32.2 33.1 34.4 36.4 32.5 na Capital Formation Rate 32.7 34.3 35.5 37.7 34.9 Na Per Capita NNI (factor cost at current prices) Rs. 24095 27183 31080 35430 40141 43749

Distribution of India’s National Income

State of the Economy Economy has decisively to a higher growth phase. There is an acceleration in domestic investment and savings rate to support high growth rate. Heavy dependence on agriculture continues. Contribution of tertiary sector is growing. Unequal distribution of income and poor standard of living Regional disparity

Economic Growth Economic growth can occur due to Available amount of resources in the economy changes over time, mainly capital and labour Change in the efficiency of the factor of production

Economic Growth: A limitation of the indicator An increased national income theoretically means greater material welfare and a rise in living standards, it does not ensure higher levels of well being for individuals in that nation. Higher Economic Growth can have negative impact like - Environment degradation Greater Inequality between Different Classes Loss of Traditional and Cultural Values

Economic Growth VS. Economic Development There are qualitative dimensions in the development process which may be missing in the growth of an economy expressed in terms of increased in the National Product or Per Capita Product.

Economic Development The problem of development must be defined as a selective attack on the worst forms of poverty. Development goals must be defined in terms of progressive reduction and eventual elimination of malnutrition, disease, illiteracy, unemployment and inequalities. -Mahbub Ul Haq

Economic Growth VS. Economic Development Uni-dimensional Multi-Dimensional Income Based Standard of Living Based Well being of the Economy Well being of the society

Measuring Development Human Development Index (HDI) Human Poverty Index (HPI) Gender-Related Development Index (GDI) Gender Empowerment Measure (GEM) Human Freedom Index (HFI)

Human Development Index Takes welfare of individuals in a country Takes following factors in to account Life Expectancy at Birth Levels of Educational Attainment Gross Domestic Product Per Capita

HDI It was developed by UNDP to measure the economic achievements of a nation in combining economic growth and social welfare. HDI is essentially a score between o and 1 HDI rank.doc

Gross happiness index Gross National Happiness: "GNH" was developed in an attempt to define an indicator that measures quality of life or social progress in more holistic and psychological terms than gross domestic product (GDP).

Gross happiness index A second-generation GNH concept, treating happiness as a socioeconomic development metric, was proposed in 2006 by Med Jones, the President of International Institute of Management. GNH value is proposed to be an index function of the total average per capita of the following 7 measures:

Measures of GNH Economic satisfaction (savings, debt and purchase power) Environmental satisfaction: (pollution, noise and traffic) Workplace satisfaction (job satisfaction, motivation, ethics, conflict, etc.) Physical health (Severe illnesses, overweight,..) Mental health (usage of antidepressants, self-esteem, positive outlook..) Social satisfaction [including family and relationship satisfaction] (domestic disputes, communication, support, sex, discrimination, safety, divorce rates, complaints of domestic conflicts and family lawsuits, public lawsuits, crime rates, etc.) Political satisfaction (quality of local democracy, individual freedom, and foreign conflicts, etc.)