Indicators of Economic Development
The factors that indicate economic development of a country are called indicators of economic development. As economic development is a dynamic concept, its indicators also change with the passage of time. So, economic development is a long-term phenomenon. However, the major indicators of economic development are as follows:
1. Real GNP (Real Gross National Product):
Over a long period of time, an increase in real GNP is considered as one of the indicators of economic development. According to this criterion, economic development refers to the increase in production of an economy. It means that economic development can be measured in terms of increase in real GNP of an economy over a long period of time. i.e., a sustained increase in real income.
But This indicator has failed to take consideration of change in population growth, pollution, distribution of income etc.
2. PCI (Per Capita Income):
Per capita income is widely used as an indicator of economic development. It refers to national income divided by total population. So, it is an average income of each individual of an economy. According to this criterion, economic development take place if only the rate of increase in real PCI is higher than the increase in population growth rate.
This indicator is used to measure the living standard of people among different countries.
But the rise in PCI may not guarantee the improvement in living standard of people. If there is high income inequality, the increased income goes to few rich instead of many poor.
3. Basic human needs:
This criterion was developed by World Bank. It is complemented to the PCI criterion. According to this criterion, the economic development is evaluated on the basis of fulfilment of basic needs in terms of health, education, water, food, clothing, shelter, work etc. and non-material needs such as cultural identity and a sense of participation and purpose in life and work. The aim of this criterion is to raise productivity and alleviate poverty by providing basic human needs to poor. This is very significant criterion because it has focus attention on poor.
4. PQLI (Physical Quality of Life Index):
This is a non-income indicator of economic development which was developed by Morris D. Marris. It consists of three indicators: infant mortality, life expectancy and literacy. While developing this index, the data on three variables, i.e., life expectancy, infant mortality and literacy rate are ranked from 1 to 100. These three variables get equal weightage and average, and these three indices give the composite index, which is known as PQLI. The value 1 refers to very inferior level and 100 refer to very superior level.
5. HDI (Human Development Index):
HDI is a recently developed indicator of economic development. It was initiated by UNDP in 1990. This indicator is based on three goals of human development which are:
Long and healthy life:
Knowledge:
It is measured by the average of expected years of schooling and mean year of schooling. For this, equal weight is given to both averages.
Standard of living:
It is measured by real GNI per capita of a country adjusted for purchasing power of currencies of different countries.
HDI is regarded as the best indicator of economic development because it includes both income and non-income indicators. It attempts to make ranking of different countries on a scale of 0 to 1.