Friday, April 16, 2010

Indicator of economic development

Indicator of economic development



There is misunderstanding among the economists over the indicators of economic development. Some of the economists have taken national product as the indicator of economic development. Some other economists have taken per capita income as the indicator of economic development. Likewise some other economists have taken economic welfare as the indicator of economic development. Various economists have taken material living standard index as the indicator of economic development. Economists of this thought have taken life-span, death rate, literacy rate as the bases. Similarly United Nations Development Program (UNDP) has developed Human Development Index (HDI) as the indicator of economic development. The indicators are income, literacy and life expectancy. The pointed of indicators lies between 0 and 1. The position upto 0.5 is the lower class of human development. From 0.5 to 0.8 is the middle class and above 0.8 is the upper class. The base of economic development indicators are as follows.
1. Per-capita income criteria
Some economists have taken economic development indicator on the basis of the increase in per-capita income. According to the classification given by the United Nations Organization in 1989 AD. countries having per Indicator of economic developmentcapita income less than 580 U. S dollars fall in the class of poor countries, countries having per capita income between 580 US dollars and 6,000 US dollars are in the middle class, and countries having per capita income more than 6,000 US dollars are in the class of rich countries. According to World Development Report 2009, per capita income of Nepal is 340 US dollars. Such indicator makes the comparative study of different countries easy. On the basis of per capita income the economic growth rate of any country can be found out. The increase in per capita income of any country shows the increase in economic growth rate of the country. The high per-capita income are given in the table below:
Table
Per capita income of Seven Rich Countries of the world.

S.No Country Per-capital income (in US dollar)
1. Norway 76,450
2. Switzerland 59,880
3. Denmark 54,910
4. Ireland 48,140
5. Sweden 46,060
6. United States of America 46,040
7. Netherlands 45,820
Source: World Development Report 2009
Likewise per-capital income of south Asian countries is as follows:
Table
South Asian Countries and their Per-Capita Income

S.No Country Per-capital income (in US dollar)
1. Bangladesh 470
2. India 950
3. Nepal 340
4. Pakistan 870
5. Sri Lanka 1540
Source : World development report 2009
2. National income criteria
Some economists have taken increase in the real national income as the indicator of economic development because per-capita income also depends upon the national income. National Indicator of economic developmentincome is related with the final goods and services produced in a country. According to this method the state of continuous increase in national income can be taken as economic development. This is specially applicable for the poor and middle class countries. Short-run increase in national income cannot be taken as economic development. Likewise increase in the national income as a result of increase in price of goods and services cannot be defined as economic development. The best way of calculating national income is the gross national product.
3. Physical quality of life index - PQLI
This is non-income indicator of economic development because this uses physical quality of life as the indicator. This method of measuring economic development is based on the following three things. They are:–
(a) Life expectancy
(b) Infant mortality
(c) Literacy.
The scale of all these things measured is between zero (0) and hundred (100) shows the lowest level and 100 shows the highest level. If in any country life expectancy measured is maximum, ie. 100 and the other two indicators are measured minimum i.e., zero then giving equal weightage to each indicator a competitive index is prepared from the average of all three. Likewise index of a country with high literacy rate will be 100. Countries having low life expectancy, low literacy rate and high infant mortality will have low index (ie. 0). If in any country PQLI is increasing then it indicates the increase in the physical quality of the life of people:
Increase in per-capita income does not necessarily indicate the increase in the facilities like healthy food, health, situation, education, etc. Therefore PQLI method is taken to be better indicator than per-capita income method.
4. Human development index - HDI
Human development index is new and modern indicator of economic development. This indicator was for the first time developed by United Nations Development Program (UNDP) in the year 1990 AD. This indicator is based on three things; They are as follows:
(a) Income for decent living
(b) Education
(e) Life expectancy.
As PQLI, HDI also divides all nations of the world in the scale of 0 to 1 on the basis of three objectives of development. In this method minimum of 0 and maximum of 1 value is given. This method has classified all nations of the world in three different classes. Low human development in from 0 to 0.50. Medium human development in from 0.51 to 0.79 and high human development is from 0.80 to 1.0. Since this method measures the relative level of human development, this focuses on life expectancy, education and physical choice. This takes per-capita income as an indicator the change in monetary value is adjusted in GNP. This is measured on the basis of the unofficial education and middle age of Indicator of economic developmentschool going population. In this method on the basis of the development of skill of all the adults and infant mortality and the nutritious food they get. When all three indicators are included an important indicator of human HDI is measured development will be obtained. On the basis of this, human development index (HDI) of different countries is obtained. In addition to this on the basic of basis necessity criteria also economic development indicators can be obtained. In addition to these various indicators the following facts are also taken as the indicators of economic development.
(a) Equality improvement.
(b) Poverty alleviation
(c) Quality of life
(d) Capital formation
(e) Fulfillment of basic needs.
(f) Population growth rare
(g) Increase in employment opportunities.
(h) Decrease in dependence on agriculture
(i) Increase in entrepreneurship
(j) Utilisation of natural resources
(k) Increase in export of finished goods.
(l) Trade diversification
(m) Extension of infrastructures
(n) Extension of markets.
(o) Improvement in technology
(p) Urbanisation, Gender equality, Human rights, etc.

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