CHAPTER ONE

ECONOMICS OF DEVELOPMENT: CONCEPTS AND

APPROACHES

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 1. Basic concepts and definition of development economics
 Some live in comfortable homes with many rooms. They have more than enough to eat, are
well clothed and healthy, and have a reasonable degree of financial security.
 Others, and these constitute a majority of the earth’s nearly 7 billion people, are much less
fortunate.
 They may have inadequate food and shelter, especially if they are among the poorest third.
 Their health is often poor, they may not know how to read or write, they may be
unemployed, and their prospects for a better life are uncertain at best.
 Over 40% of the world’s population lives on less than $2 per day.
 The prevalence of poverty in a world where some people enjoy great prosperity raises big
questions:
 Why are some people and countries so much poorer than others?
 How did some countries become prosperous?
 What can governments and philanthropic organizations do to reduce poverty and encourage
the spread of prosperity?
 Such questions motivate interest in the subject of development. 2
 Though the study of economic development has attracted the attention of economists right
from Adam Smith down to Marx and Keynes,
 They were mainly interested in the problems which were essentially static in nature and
largely related to a Western European framework of social and cultural institutions.
 It is, however, in the forties of the 20th century and especially after the Second World War
that economists started devoting their attention towards analyzing the problems of
underdeveloped countries and formulating theories and models of development and growth.
 Development Economics deals with the economic, social, political, and institutional
mechanisms, both public and private, necessary to bring about rapid and large-scale
improvements in levels of living for the peoples of Africa, Asia, and Latin America.
 Development became significant in the period immediately following World War II. The
Western world confronted the new challenge of rebuilding countries-and in Europe, a
continent-that had been shattered by war.
 Alongside them arose a tradition of theorizing about the special challenges facing backward
regions and countries, and the means by which these challenges could be met in such a way
as to put these areas on sustainable paths to industrialization.
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 Their interest in the economics of development has been further stimulated by the wave of
political resurgence that swept the Asian and African nations as they threw off the colonial
yoke after the Second World War.
 The desire on the part of new leaders in these countries to promote rapid economic
development coupled with the realization on the part of the developed nations that ‘poverty
anywhere is a threat to prosperity everywhere,’ has aroused further interest in the subject.
 The experience of the 1950s and 1960s, when many developing nations did reach their
economic growth targets but the levels of living of the masses of people remained for the
most part unchanged, signaled that something was very wrong with this narrow definition of
development.
 An increasing number of economists and policymakers clamored for more direct attacks on
wide spread absolute poverty, increasingly inequitable income distributions, and rising
unemployment.
 In short, during the 1970s, economic development came to be redefined in terms of the
reduction or elimination of poverty, inequality, and unemployment within the context of
a growing economy. “Redistribution from growth” became a common slogan. 4
 A number of developing countries experienced relatively high rates of growth of per capita
income during the 1960s and 1970s but showed little or no improvement or even an actual
decline in employment, equality, and the real incomes of the bottom 40% of their
populations.
 By the earlier growth definition, these countries were developing; by the newer poverty,
equality, and employment criteria, they were not. The situation in the 1980s and 1990s
worsened further as GNI growth rates turned negative for many developing countries, and
governments, facing mounting foreign-debt problems, were forced to cut back on their
already limited social and economic programs.
 Growth was rapid in much of the developing world in the 2000s, while many wondered if it
was fueled by the bubbles in the West and could be derailed by the financial crisis and later
aftershocks.

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 Development must therefore be conceived of as a multidimensional process involving
major changes in social structures, popular attitudes, and national institutions, as well as the
acceleration of economic growth, the reduction of inequality, and the eradication of
poverty.
 Development, in its essence, must represent the whole gamut of change by which an entire
social system, tuned to the diverse basic needs and evolving aspirations of individuals and
social groups within that system, moves away from a condition of life widely perceived as
unsatisfactory toward a situation or condition of life regarded as materially and spiritually
better. No one has identified the human goals of economic development as well as Amartya
Sen, perhaps the leading thinker on the meaning of development.

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 1.2 The Scope and Nature of Development Economics
 Traditional economics is concerned primarily with the efficient, least-cost allocation of scarce
productive resources and with the optimal growth of these resources over time so as to
produce an ever-expanding range of goods and services.
 Traditional neoclassical economics deals with an advanced capitalist world of perfect markets;
consumer sovereignty; automatic price adjustments; decisions made on the basis of marginal,
private-profit, and utility calculations; and equilibrium outcomes in all product and resource
markets.
 It assumes economic “rationality” and a purely materialistic, individualistic, self-interested
orientation toward economic decision making.
 Political economy: attempt to merge economic analysis with practical politics—to view
economic activity in its political context.
 Political economy is therefore concerned with the relationship between politics and
economics, with a special emphasis on the role of power in economic decision making.

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 Development economics has an even greater scope.
 The efficient allocation of existing scarce (or idle) productive resources and with their
sustained growth over time,
 Also deal with the economic, social, political, and institutional mechanisms, both public and
private, necessary to bring about rapid (at least by historical standards) and large-scale
improvements in levels of living for the peoples of Africa, Asia, Latin America, and the
formerly socialist transition economies.
 Thus, development economics, to a greater extent than traditional neoclassical economics or
even political economy, must be concerned with the economic, cultural, and political
requirements for effecting rapid structural and institutional transformations of entire societies
in a manner that will most efficiently bring the fruits of economic progress to the broadest
segments of their populations.
 It must focus on the mechanisms that keep families, regions, and even entire nations in
poverty traps, in which past poverty causes future poverty, and on the most effective
strategies for breaking out of these traps.

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• Consequently, a larger government role and some degree of coordinated economic decision making
directed toward transforming the economy are usually viewed as essential components of development
economics. Yet this must somehow be achieved despite the fact that both governments and markets
typically function less well in the developing world. In recent years, activities of nongovernmental
organizations, both national and international, have grown rapidly and are also receiving increasing
attention.

1.3. Why we study Development Economics

A. Problem of World Poverty: The discipline of Economic Development starts with the problem of
backwardness and international poverty.
B. Meaning of Economic Development: The Western experts were of the view that if real GNP and per
capita GNP of a country increase over a long period of time it would be given the name of economic
development. But later on, a lot of criticism was made against these measures of development. Then the
economists engaged themselves in finding other measures of economic development. Accordingly, the social
and economic indicator approach, the basic needs approach and the construction of human development index
approach has been introduced by the economists and sociologists to measure economic development. 9
c. Models of Economic Growth: In Development Economies we come across a lot of models
of economic growth which present the picture of economic growth of western advanced
countries. It means that how the developed nations got growth or what was their route of
economic.
D. Theories of Under-Development and Development: Development Economics also
presents a lot of theories regarding the under-development of the poor countries as well as the
theoretical means and ways through which the poor and backward nations of the world can
attain economic development.
E. Problems of Population: Economic Development wheals with the issues of population
growth, its effects on production, employment, migration, urbanization, and environment etc.
Again, development economics presents different theories regarding population, i.e., what
should be the optimum level of population for any country, let quantity of labor which could
have compatibility with the resources of the country.
F. Dualistic Theories: In Development Economics we study the models of dualistic economies
like Lewis model of unlimited supply of labor and Ranis-Fei model etc. 10
G. Role of Agriculture Sector: The Development Economies tells us how the status of agri.
sector can be changed. In this respect, the development economists suggest for land reforms,
introduction of crash program in agriculture, provision of subsidies on inputs to the farmers,
and the implementation of procurement prices schemes for farm outputs.
H. Role of Industrial Sector: The Development Economies which guides the developing
countries regarding new technologies, more financial funds for industrialists, choice of
technologies and establishment of new industries, the package of industrial investment, the
balanced growth pattern, or unbalanced growth pattern, and the pursuance of export
promotion strategy of industrialization or import substitution policy of industrialization.
I.Foreign Trade Sector and Development: From the history of advanced countries, it
becomes obvious that foreign trade sector played an important role in their economic
development. Therefore, if the developing countries wish to attain economic development,
they should promote their foreign trade sector. This was the one-sided view regarding trade
and growth. But the Development Economists, like Gunner Myrdal, Hans Singer, R. Prebisch
etc., have also given the opposite view.
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J. Foreign Private Investment and Development: Development Economics tells us that
foreign private investment and the role of MNCs are furnished with a lot of problems. They
exploit the laboring class of the poor countries and they are engaged in the activities like
transfer pricing.
K. Role of State in Economic Development: It is the Development Economies which
discusses the role of state in economic development.
L. Fiscal and Monetary Policies and Economic Development.
M. World Development Institutions and Foreign Aid: Development Economics helps us to
know about foreign aid, it types, its positive role, its side effects, repayments of loans and
interest charges.

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 1.4. Economic Growth and Economic Development
 Economic growth is related to a quantitative sustained increase in the country’s per capita output or income accompanied
by expansion in its labor force, consumption, capital, and volume of trade.
 On the other hand, economic development is a wider concept than economic growth. “It is taken to mean growth plus
change.” It is related to qualitative changes in economic wants, goods, incentives, institutions, productivity, and
knowledge or the “upward movement of the entire social system”.
 It describes the underlying determinants of growth such as technological and structural changes. Growth may be
necessary but not sufficient for development.
 Economic growth refers to increases in a country’s production or income per capita.
 Economic development refers to economic growth accompanied by changes in output distribution and economic structure.
 These changes may include
 an improvement in the material well-being of the poorer half of the population;
 a decline in agriculture’s share of GNP and a corresponding increase in the GNP share of industry and services;
 an increase in the education and skills of the labor force; and Substantial technical advances originating within the
country.
 Development is the process of improving the quality of all human lives and capabilities by raising people’s levels of
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living, self-esteem, and freedom.
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 1.5 Three core values of Development
1. Sustenance: The ability to meet basic needs.
 The ability to meet life-sustaining basic human needs including shelter, food, health, education, safety(protection)
 When any of these is absent, a condition of “absolute underdevelopment” exists.
2. Self-Esteem: To be a person.
 The feeling of worthiness that a society enjoys when its social, political, and economic systems and institutions
promote human values such as respect, dignity, integrity, and self-determination. not being used as a tool by
others for their own ends.
3. Freedom from Servitude: To Be Able to Choose.
 To be able to choose the path to prosperity and have the opportunity to improve a situation in which a society has
at its disposal a variety of alternatives from which to satisfy its wants and individuals enjoy real choices according
to their references.

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 The Three Objectives of Development

• Whatever the specific components of the better life, development in all societies must have at
least the following three objectives:
1) To increase the availability and widen the distribution of basic life-sustaining goods such as
food, shelter, health, and protection
2) To raise levels of living, including, in addition to higher incomes, the provision of more jobs,
better education, and greater attention to cultural and human values, all of which will serve
not only to enhance material well-being but also to generate greater individual and national
self-esteem.
3) To expand the range of economic and social choices available to individuals and nations by
freeing them from servitude and dependence, not only in relation to other people and nation-
states, but also to the forces of ignorance and human misery. 16
 1.6 Measurement and international comparison of growth and development
A. Conventional measurements
1. GNP: One of the methods to measure economic development is in terms of an increase in the economy’s real
national income over a long period of time.
 Shortcomings
 Price changes will have to be ruled out while calculating real national income (Real national income” refers to
the country’s total output of final goods and services in real terms rather than in money terms.)
 This measure fails to take into consideration changes in the growth of population.
 The GNP figure also does not reveal the costs to society of environmental pollution, urbanization, and
industrialization and population growth.
 Further, it tells us nothing about the distribution of income in the economy.
 GNP is always measured in money, but there are a number of goods and services which are difficult to be
assessed in terms of money
 Another difficulty in calculating GNP is of double counting.
 GNP makes no distinction between such valuable services, it equates goods with bads.
 Income earned through illegal activities such as gambling, or illicit extraction of wine, etc. is not included in
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GNP.
2. GNP Per Capita: an increase in the per capita real income of the economy over the long
period.
 Shortcomings
 An increase in per capita income may not raise the real standard of living of the masses.
 There is another possibility of the masses remaining poor despite an increase in the real
GNP per capita if the increased income goes to the few rich instead of going to the many
poor.
 Such a measure subordinates other questions regarding “the structure of the society, the size
and composition of its population, its institutions and culture, the resource patterns and even
distribution of output among the society’s members.”
 The real per capita income estimates fail to measure adequately changes in output due to
changes in the price level. Index numbers used to measure changes in the price level are
simply rough approximations
 The real GNP per capita fails to take into account problems associated with basic needs like
nutrition, health, sanitation, housing, water, and education.
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3. Welfare: Economic development is regarded as a process whereby there is an increase in the
consumption of goods and services of individuals.
 limitations
• The weights to be attached to the consumption of individuals.
• The composition of the total output that is giving rise to an increase in per capita consumption, and
how this output is being valued. The increased total output may be composed of capital goods. It may
be at the cost of a reduced output of consumer goods.
• The real difficulty arises in the valuation of the output.
• The expansion of real national output might have raised the real costs (pain and sacrifice) and social
costs in the economy. For instance, the increased output might have resulted from long hours and in
the deterioration of the working conditions of the labour force.
• It is not essential that with the increase in national income, the economic welfare might have
improved.
• Last, we cannot equate an increase in output per head with an increase in economic welfare, let alone
social welfare without additional considerations. To specify an optimum rate of development, we must
make value judgements regarding income distribution, composition of output, tastes, real cost and
other particular changes that are associated with the overall increase in the real income.
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Alternative measures of level of development
1. Social Indicators or Basic Needs
 Social indicators are often referred to as the basic needs for development. Basic needs focus
on alleviation of poverty by providing basic human needs to the poor. provision of such basic
needs affects poverty in a shorter period and with fewer monetary resources than GNP/GNP
per capita strategy which aims at increasing productivity and incomes of the poor
automatically over the long run.
Basic Needs Indicator
1. Health Life expectancy at birth
2. Education. Literacy signifying primary school enrolment as per cent of population
3. Food Calorie supply per head.
4. Water Supply Infant mortality and percentage of population with access to potable water.
5. Sanitation Infant mortality and percentage of population with access to sanitation.
6. Housing None. 20
•Limitations.
• There is no unanimity among economists as to the number and type of items to be included in such

an index.
• There is the problem of assigning weights to the various items which may depend upon the social,

economic, and political setup of the country. This involves subjectivity.

• Social indicators are concerned with current welfare and are not related to the future.
• The majority of indicators are inputs and not outputs, such as education, health, etc.
• They involve value judgements.

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2. Human Development Indices
A. Physical Quality of Life Index :It was invented by M.D. Morris in 1979.
Combines 3 indicators:
• Infant mortality rate at age one
• Life expectancy
• Basic literacy at age 15

• Equal weight
• Ranging from zero to 100
• Zero worst performance 100 best performance
PQLI = Life expec. index + infant mort. index + literacy index
3

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 The PQLI indirectly reflects the effects on human development of investment in health
service, water and sewage systems, quality of food and nutrition, education, housing, and
changes in income distribution.
 PQLI is, therefore, helped redirecting attention away from growth, toward a broader
concept of human development.
To find out the achievement level of the positive variable, its minimum value is deducted
from its actual value and the balance is divided by the difference (range) between
maximum value and minimum value i.e.

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To find out the achievement level for a negative indicator

For life expectancy and infant mortality rate, there is no natural maximum and minimum
value. But there is need to select the right values.
Table 1: Maximum and Minimum Values of Component

•Construction of PQLI: on the basis of the values of the component indicators given in Table 1, we can construct the PQLI on the basis of
the three indices in the following manner :

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25
Its Limitations:
 It supplements but does not supplant the GNP. It fails to dislodge GNP from its lofty perch.
o It does not explain the changing structure of economic and social organization (does not
measure economic development).
o It does not measure total welfare.
o Use equal weights for the three variables of his PQLI which undermine the value of the
index in a comparative analysis of different countries.
 income and consumption statistics and distribution-sensitive methods of aggregation are
ignored by it.”

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 B. Human Development Index (HDI)
 In other words, it is an index measuring national socioeconomic development, based on
combining measures of education, health, and adjusted real income per capita.
 Educational attainment : the adult literacy rate (2/3) and the combined gross enrollment
rate(1/3)
 Longevity is measured by average life expectancy (in years) at birth,
 The indicator for living standards is based on the logarithm of per capita GDP in purchasing
power parity in terms of dollar (PPP $ )
 The HDI currently ranks countries into four groups:
 low human development (0.0 to 0.535),
 medium human development (0.536 to 0.711),
 high human development (0.712 to 0.799), and
 very high human development (0.80 to 1.0).
 Calculating the HDI: Before the HDI is calculated, an index is created for each of these
dimensions: 27
 Table 2: Goalposts for Calculating the HDI
•Performance in each dimension is expressed as a value between 0 and 1 by applying the
following formula:

1. Life Expectancy Index: It the life expectancy at birth of a country is 78 years, then the life expectancy
index for that country would be
2. Education Index: The education Index is the combination of adult literacy index and gross enrolment index. If
the adult literacy rate of this country is 92, then its adult literacy index would be
- If the combined gross enrolment in this country is 60, then its gross enrolment index would be
3. GDP Index: The GDP per capita (PPPUS$) of this country is $8,840, then the GDP index would be
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Its Limitations:

1. It is a crude index which attempts to catch in one simple number a complex reality about human
development and deprivation, according to Prof. Amartya Sen.
2. The three indicators are not the only indicators of human development. There can be others like infant
mortality, nutrition, etc.
3. The HDI measures relative rather than absolute human development.
4. The weighting scheme for calculating the four components of HDI seems arbitrary.
5. Even giving equal (1/3rd) weight to each of the very different three indices for calculating the HDI is
arbitrary.
6. A country having high HDI may shift the focus from the high inequality, unemployment, and poverty
found within it.

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 C. Human poverty Index (HPI):UN
 The percentage of the population not expected to survive to the age of 40 (P1)

 The adult illiteracy rate (P2)

 A deprivation index based on an average of three variables: the percentage of the population
without access to safe water; the percentage of population without access to health service; and
the percentage of the underweight children under five years old (P3).
HPI = [1/3(P13 + P23 + P33)] 1/3
The formula is given by:

• Recent estimates for global poverty state that 8.6% of the world, or 736 million people, live in
extreme poverty on $1.90 or less a day, according to the World Bank.
Limitations:
 Poverty indices ignore the distribution of food within the family. Usually the female members (who work harder than males)
receive less food.
 Nor does it measure how far the families lie below the poverty line, or improvements in those below the line, and distribution
of food between different families. 30
1.7 Obstacles to Development

1.Vicious circle of poverty: It implies a circular constellation of forces tending to act and react
upon one another in such a way as to keep a poor country in a state of poverty.
• Vicious circle of poverty: Demand Side
• Low productivity => Low agricultural surplus => Low demand for industrial product => Lack of
industrialization => Over population in agriculture => Low productivity =>…
• Vicious circle of poverty: Supply Side
• Low percapita income=> Low saving=> Low capital formation=> Low capital per worker=> Low
productivity=> Low percapita income=>…
• Vicious circle of poverty under developed human and natural resource
• Backward People => Underdeveloped Natural Resource => Market Imperfection => Backward
People=>…
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2. Low Rate of Capital Formation
 Poverty is both a cause and a consequence of a country’s low rate of capital formation.
 Underdeveloped countries are characterized by:
• Illiterate and unskilled,
• Use outmoded capital equipment and methods of production
• Subsistence farming
• Lack of mobility have little connections with market sector of the economy
• MP is extremely low
• Low productivity leads to low real income, low saving, low investment and to low rate of
capital formation
 Very low consumption: Difficult to restrict it further to increase the capital stock: use outdated
and obsolete capital equipment 32
 It is the high-income group that does most of the savings in underdeveloped countries. But
these savings do not flow into productive channels.
 Insecure land tenure =>low saving and investment.
• Other reasons inhibit investment
• Sheer habit: Would not like to take risks in new ventures.
• Small domestic market
• Difficulty of securing funds for investment
• Lack of skilled labor and factor mobility
• Inadequacy of basic service
• Scarce entrepreneurial ability

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3. Socio-Cultural Constraints
 Economic development has much to do with human endowments, social attitudes, political
conditions, and historical accidents.
 Capital is a necessary but not a sufficient condition of progress.
 Broadly speaking, underdeveloped countries possess social institutions and display such
attitudes as are not conducive to economic development.
• Rigid stratifications of occupations reinforced by: traditional beliefs and values; attitudes caste
and classes; cleavages and ethnic or religious distinctions; difference in cultural tradition and
social pattern kinship loyalties and regional identifications.
• Inhibit social and geographical mobility and constitute drag on progress.
• Abilities go unused
• Festival celebrations
• Biased toward non-technical and professional education
• Religious orientations
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• Consider work as necessary evil rather than a virtue.
4. Agricultural constraint

• The problem is related to the environment agriculture is practiced

• The technology available to them
• The incentives for production and investment
• The availability and price of inputs
• The provision of irrigation and the climate
• LDCs situated in tropical and sub-tropical zones are at disadvantage in terms of climate

• As a result of env’t factors agricultural output fails to increase to meet the rising demand
• Further when population growth is high agricultural and output may fall instead of
increasing=> sluggish economic growth

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5. Human Resources Constraint:
 Undeveloped human resources are an important obstacle to economic development in LDCs.
♣ Such countries lack in people possessing critical skills and knowledge required for all-round development of
the economy.
♣ The existence of surplus labour in them is to a considerable extent due to shortage of critical skills.
♣ Since LDCs have a dearth of critical skills and knowledge, physical capital, whether indigenous or imported,
cannot be productively utilised. As a result, machines breakdown and wearout soon, materials and
components are wasted, the quality of production falls, and costs rise.
6. Foreign exchange constraint
 Fluctuations in demand for and price of products
 Structural rigidity(agricultural and mineral export)
 Unfavorable balance of payment
 Leads to deteriorations in terms of trade (capacity to import) => foreign exchange constraint
 Need for aid and FDI
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 1.8 Basic Requirements for Development
 Economic and non-economic factors
 Economic factors:-
1. Natural resources(NR): these include Land, fertile land, forest, minerals, climate, water
resources, sea resources
 But in LDCs these recourses are unutilized and underutilized because of d/t reasons.
 NR are not sufficient condition for dev’t /growth
 Need for proper exploitation of these NR
 Improved tech and knowledge
 E.g. Britain used crop rotation and France used British pattern despite the shortage of the
land.
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 Asia and Africa have not develop their agriculture b/c they use old method of production
 NR deficient country may become rich in resources discovery of new uses for known
resources e.g. Japan.

2. Capital accumulation/formation
Capital: stock of physical reproducible factors of production
CA: increase in capital stock over time
• It is cumulative and self-feeding process that includes three inter-related
• The existence of real savings and rise in them
• The existence of credit and financial institutions
• To use these savings for investment in capital goods

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 In LDCs MPS is low: need for forced saving
 Taxation, deficit financing and borrowing
 Mobilization of disguised rural unemployed in construction
 Loans, grants and larger export=> Capital accumulation
 CA: reflects effective demand, creates productive efficiency
 Investment in capital goods: employment creation , technological progress ( specialization
and economies of the large scale production), help exploit NR, provision of social and
economic overheads(transport, water ,power, education…)

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3. Organization: Complement to factors of production and related to entrepreneurial
activity.
• LDCs lack entrepreneurial.
• Need for encouragement and fiscal and monetary policies encourage entrepreneurship.

4. Technological progress: helps increase in productivity of factors of production.

• Kuznet's five distinct pattern of technological growth.

• A scientific discovery
• An invention
• An innovation
• An improvement
• The spread of innovations usually accompanied by improvements.
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5. Division of labour and scale of Production:
• Increase productivity and production; but depend on economic progress/ market
demand
6. Structural changes:
• Need for transformation from primary to secondary to tertiary
• Reduction in share of agriculture in income and employment
• Such structural changes lead to increasing employment opportunities, higher labour productivity
and the stock of capital, exploitation of new resources and improvement in technology.

41
 Non-economic factors
1. Social factors:
• Related with attitudes, values and institutions
• Change in attitudes, expectations lead to habit of saving and investment
• Society develops the “the will to economize” : to maximize output given input
• Economic and religion freedom brings further changes in social attitudes and values
• But in LDCs social attitudes, values and institutions are not conducive for economic
development
• Religious dogma, are not hard working

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 Non-economic factors….continued

2. Human factors
• Human capital is fundamental element of economic growth/development.
• Knowledge, experience/learning by doing/,
3. Political and administrative factors
• For sustained development stable and conducive political and administrative environment is
crucial.

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 1.9. Development Gap
• Development Gap: the difference between richer countries(DCs) and the poorer countries
(LDCs) using social and economic indicators.
• Unequal distribution of wealth.
• DCs have only 20% of the world's population but own 80% of the world's wealth.
• DCs are mainly found in the northern hemisphere and consist of countries such as USA,
Canada, Britain, Germany & Japan.
• LDCs are mainly found in the southern hemisphere and mainly in the continents of Africa,
Asia & South America.
• Development gap can also occur within countries, for example between regions or between
urban and rural areas.
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Four questions solutions

45
1. Given current PCI growth how long would it take LDCs to reach the current base average PCI of the DCs?

46
2. Given current PCI growth of DCs how fast the LDCs would have to grow to eliminate the
gap of the base year PCI if growth rate of LDC is 6%?

47
3. Given current PCI growth of DCs how fast the LDCs would have to grow to eliminate the gap
of last year PCI of DCs?

48
4. Given current PCI growth of DCs how fast LDCs would have to grow to prevent the widening absolute PCI gap by 2020?

49