Economic Development, Its Indicator and Characteristics of Developing Nation

Subject: Economics

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The concept of economic development changes along with the changes in human attitudes, behaviour and activities. The definition given in specific time may not be suitable for another period. Measurement of economic development and express in the definite index is a very difficult task in economics. So many options are found to indicate the level of economic development likewise GNP index, Per capita income index, Physical Quality of Life Index (PQLI), Human Development Index (HDI) and Basic needs approach.
Economic Development, Its Indicator and Characteristics of Developing Nation

Economic Development

In our common understanding, we use economic growths and economic development for same meaning but there is a vast difference between them. Economic growth actually occurs when the output of nation increases but the development is related to a various aspect. It is very difficult to define economic development. It is because in the course of time the meaning of economic development changes and primary areas of measuring the economic development are also different. In this sense, economic development is comparatively wider concept than economic growth.

Differences between economic growth and economic development:

Economic Growth Economic Development
It is based on narrow scope. It is based on broad scope.
Its effect can be tested quickly. Its effect can be tested for a long time.
It aims to accelerate the positive face of concern subject. Its aim to establish an equitable distribution of income, wealth employment.
It is necessary condition of economic development. It is a sufficient condition for development.
The indicators of economic growth are NI and PCI. The indicator of economic development is GNP, PCI, ETC.

Characteristics of Developing Nation


Most of the developing nation are economically poor and they have common features. Some of the feature of developing nation are given below:

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  1. Mass Poverty
    A large number of population in developing nation are below poverty line. GDP, PCI are less so the living standard of people is very poor. The people are unable to live the quality life. The people are ill-treated and half-fed.

  2. Agro-Based Economy
    All most all the developing nation are agriculture nation so the economy is based on agriculture. It is the measure source of national income as well as employment. The traditional agriculture system is in practice in developing nation where the dependency ratio upon agriculture is very high. Agricultural products are the major source of raw material, food grains.

  3. High Population Growth
    The population growth rate in developing nation is very high. On one side labor intensive culture is the major cause behind it and in the other hand method or concept, illiteracy, insufficient health facilities etc are a cause of it.

  4. Vicious Circle of Poverty
    Most of the developing nation are trapped vicious circle of poverty. The people have a low income but a high percent of their income is spent on the consumption. Because of that, there is low saving. This low saving resolves in weak capital formation. Because of that, there are fewer investments and low productivity which make them poor.

  5. Underutilization of Resources
    In the context of developing nation through the resource potential may be high but they are an underutilized lack of strong capital formation for the investment is the major cause behind it. Besides that lack of skill manpower, technology, market etc are the problem of underutilization of the resource.

  6. Dualistic Economic
    The economic of developing nation is dualistic in absence of urban economy and rural economy. The rural economy is still at substance level guided by traditional agriculture, on the other hand, the urban area economy depends upon another source such as industry, trade etc.

  7. Socio-Culture Feature
    The life of the people in developing countries is mostly guided by their unreasonable socials cultural belief or activities. The people have blind faith over their religious, social and cultural belief which has developed many social evils problem in developing countries. They believe in god rather than their work.

  8. Demographic Feature
    As we mention the population growth rate is high in developing nation infant mortality rate, child mortality, the material mortality rate is very high. Most of the demographic indicator like CBR, CDR, IMR, etc are very poor in the context of developing countries.

  9. High Foreign Dependency
    Most of the developing nation have a common feature i.e. their dependency upon foreign country is very high. Because of the low productivity, the countries are unable to promote export which encourages import in their nation.

Indicators of Economic Development

Measurement of economic development and express it in the definite index is a very difficult task in economics. So many opinions are found to indicate the level of economic development of a nation. However, some common and popular indicators that used to measure economic development are discussed below:

  1. GNP Index
    Economists like Simon Kuznets, Paul Albert, etc. have considered that increase in real GNP in any period of a long run is a good indicator of economic development. An increase in real GNP results in an increase in economic activities and then creates more employment opportunities. It helps to maintain maximum welfare in the society.

  2. Per Capita Income Index
    In terms of this indicator, development is said to take place if the growth rate of national income exceeds the growth rate of population. It reveals that the country is getting better off gradually and the availability of goods and services has increased. This index is especially suitable in developing countries.

  3. Physical Quality of Life Index (PQLI)
    PQLI is a common indicator of development. It is computed from life expectancy at birth, infant mortality rate and a literacy rate of a country. If people live longer and are literate, PQLI value will be high. PQLI is measured on a scale of 1 to 100. If its value crosses 50, the country is supposed to be advanced and if the value lies below 50 the nations are supposed to be developing. PQLI as an index was developed by Morris D Morris, which measures only personal facts.

  4. Human Development Index (HDI)
    The HDI is an indicator introduced by United Nations Development Programme (UNDP) in the World Human Development Report in 1990. Since then, it has been the most popular indicator of development. It measures development in terms of people's real income level, health, education, environment and gender issues. It is a composite index rated from zero to one. It is expressed in three digits after decimal point.

  5. Basic Needs Approach
    This requires on assessment of development in terms of the extent to which the basic needs of the population, in particular of the poor, are satisfied. The approach involves satisfying the minimum levels of physical needs. This line of thinking considers even PQLI as inadequate and less helpful in fighting the many evils of poverty.


Adhikari, Ramesh Prasad, Economics-XI, Asmita Pustak Prakashan, Kathmandu

Kanel, Navaraj, Principles of Economics-XI, Buddha Prakashan, Kathmandu

Kharel, Khom Raj, Economics In English Medium-XI, Sukunda Pustak Bhawan, Kathmandu

Things to remember

Characteristics of Developing Nation

  1. Mass poverty
  2. Agro-based economy
  3. High population growth
  4. Vicious circle of poverty
  5. Underutilization of resources
  6. Dualistic economic
  7. Socio-culture feature
  8. Demographic feature
  9. High foreign dependency

Indicators of Economic Development

  1. GNP index
  2. Per capita income index
  3. Physical Quality of Life Index (PQLI)
  4. Human Development Index (HDI)
  5. Basic needs approach


  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.

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