16B1NHS532_Planning and Economic Development (PED)

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LECTURE 2:

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INDICATORS OF ECONOMIC DEVELOPMENT

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 16B1NHS532_Planning and Economic Development (PED)

Content of Lecture 2
◦ Nine Economic Indicators of Economic
Development

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◦ Few Non-economic Indicators of Economic
Development

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◦ Features of LDCs

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 16B1NHS532_Planning and Economic Development (PED)

Indicators of Economic Development

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Economic Non-Economic
Indicators Indicators

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 16B1NHS532_Planning and Economic Development (PED)

Economic Indicators of ED
1. National Income: already discussed

2. Natural Resources

3. Population or Human Resources/Skill Formation

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4. Capital Formation

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5. Technical Progress

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6. Financial Institutions/ Financial Stability

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7. Size of the market/ Quantity and Quality of Enterprise

8. Structural Changes

9.Development Planning
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 16B1NHS532_Planning and Economic Development (PED)

2. Natural Resources
◦ Availability of natural resources varies widely among LDCs

◦ If available, LDC natural resources are

sometimes owned or controlled by foreign

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MNCs

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◦ Commodity prices subject to price volatility

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 16B1NHS532_Planning and Economic Development (PED)

3. Population or Human
Resources/Skill Formation
◦Overpopulation
◦ Extremely low per capita income

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◦ Relatively high population growth rates

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◦Un/underemployment

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◦Low labor productivity (literacy, health
care, technology, investment)

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 16B1NHS532_Planning and Economic Development (PED)

4. Capital Formation
◦ Capital investment drives increases in labour
productivity and per capita output

◦ If output rises faster than population growth, savings

may enable additional capital formation

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◦ But, generating savings is extremely difficult when
income levels are so low

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◦ Relatively high level of investment risk in LDCs acts as

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a disincentive for investment
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Political risk
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Currency devaluation

◦ Poor public infrastructure

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 16B1NHS532_Planning and Economic Development (PED)

5. Technical Progress
◦ Linked to capital investment
◦ Driver of increasing productivity

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◦ If ability to borrow technology from

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more advanced countries, It promotes
EG as well as ED

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◦ Caution: Lack of skilled labor and
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existing capital base can limit
application of new technology

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 16B1NHS532_Planning and Economic Development (PED)

Non-Economic Indicators
1. Political/ Institutional Factors
◦ Corruption and bribery
◦ Education systems
◦ Land ownership (too concentrated or too fractured)
2. Social cultural and Religious Factors

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◦ Culture, tradition and custom determine ED

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◦ Factors like: Illiteracy, Joint Family and Caste system, Unproductive Expenditure,
Low Participation of Women in the workforce, Brain drain, Favouritism and
Nepotism

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3. Hope For Development

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4. Freedom from Corruption

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 16B1NHS532_Planning and Economic Development (PED)

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FEATURES OF LDCS

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1. The Vicious Circle

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2. Dualistic Structure
◦ Excessive Dependence on Agriculture

◦ Lack of Capital and Low Rate of Capital Formation

◦ Rapid Population Growth and Disguised Unemployment

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◦ Dualistic Structure of the Underdeveloped Economies

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 16B1NHS532_Planning and Economic Development (PED)

3. Disguised unemployment
◦Why? Because

◦ People are

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◦ sickness / disability benefits

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◦ doing part-time work

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◦ forced to take early retirement

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◦ doing jobs that are completely unproductive

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 16B1NHS532_Planning and Economic Development (PED)

Bibliography
◦ Seers, D. (1972). "What are we trying to measure?" The Journal of
Development Studies 8(3): 21-36.
◦ Todaro, M. P., & Smith, S. C. (2015). Economic Development (12 ed.). New
Delhi: Pearson.

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◦ Sprout, R. V. A., & Weaver, J. H. (1992). International distribution of
income: 1960–1987. Kyklos, 45(2), 237-258. doi:10.1111/j.1467-

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6435.1992.tb02116.x
◦ Meier GM, Baldwin RE (1957) Economic Development: Theory, History,

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Policy. John Wiley and Sons,

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◦ Ray D (2012) Development Economics. 19 edn. Oxford University Press,

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New Delhi, India
◦ Rogers S, Gentry S (2018) Economic Development and Planning. Scientific
e-Resources,
◦ Thirlwall A (2009) Growth & Development: With Special Reference to
Developing Economies. 8 edn. Palgrace Macmilan, New York

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Other Resources for the Students, if

any
◦ Videos

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◦ Case-study
◦ Research Papers

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◦ Seers, D. (1972). "What are we trying to measure?" The Journal of Development Studies 8(3): 21-
36.

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◦ Others

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