Economics of Development and Planning


A good plan may fail due to faulty implementation. But a faulty plan cannot succeed through good implementation.“Plan your work for today and every day, then work your plan.”
-Margaret Thatcher

Meaning of Development and Underdevelopment:

The concept “development” refers tothe structural changes towards betterment.
Until the World War II, interest was rarely
shown on the problems of the present day
third World Countries. After the Second
World War, economists started devoting
their attention towards analyzing the
problems of underdeveloped countries
and formulating theories and models
of development and growth. The Under
Developed Countries (UDCs) were
once the colonies of England and other
European countries. After becoming free
and independent, there was an awakening
to march towards economic development.

Approaches to Economic Development: There are two main approaches to
the concept of development viz i) the
traditional approach and ii) the new
welfare oriented approach.
1. Traditional Approach: The traditional approach defines development strictly in economic terms. The increase in GNP is accompanied by decline in share of agriculture in output and employment while those of manufacturing and service sectors increase. It emphasizes the importance of industrialization. It was assumed that growth in GNP per capita would trickle down to people at the bottom.
2. New Welfare oriented Approach:During 1970s, economic development was redefined in terms of reduction of poverty, ‘inequality’ and unemployment within the context of a growing economy.In this phase,‘Redistribution with Growth’became the popular slogan.To quote Michael P. Todaro,“Development must, therefore, be conceived as a multidimensional process involving major changes in social
structures, popular attitudes and national
institutions as well as the acceleration of growth, the reduction of inequality andthe eradication of absolute poverty”.

The UDCs are characterized by
predominance of primary sector i.eagriculture, low per capita income,widespread poverty, wide inequality in distribution of income and wealth, over population, low rate of capital formation, high rate of unemployment, technological backwardness, dualism etc.

Meaning of Underdevelopment:
The term underdevelopment refers
to that state of an economy where levels
of living of masses are extremely low due
to very low levels of Percapita income, resulting from low levels of productivity
and high growth rate of population.

Economic Growth Vs Economic
1. State of Development:Generally speaking, economic development refers to the problems of underdeveloped countries and economic
growth to those of developed countries. 2. Nature and Level of Change:Development is a discontinuous andspontaneous change while growth is a gradual and steady change in the long run. 3. Scope of Change:Growth simply means more output.But development refers to efficiency in production i.e. output per unit of input.It also implies changes in compositionof output and in allocation of resources,reduction of poverty, inequality and
4. Extent of change:Economic development (wider concept than economic growth) is taken to mean growth plus structural change.

Measurement of Economic Development:
Economic development is measured on the basis of four criteria
� Gross National Product (GNP): GNP is the total market value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad),minus income of non-residents located in that country. GNP is one measure of the economic condition of a country,
under the assumption that a higher GNP leads to a higher quality of living,all other things being equal.
�GNP per capita: This relates to increase in the per capita real income of the economy over the long period.This indicator of economic growth emphasizes that for economic development the rate of increase in real per capita income should be higher
than the growth rate of population.
�Welfare: Economic development is regarded as a process whereby there is an increase in the consumption of goods and services by individuals.From the welfare perspective, economic development is defined as a sustained improvement in health, literacy and
standard of living.
�  Social Indicators: Social indicators
are normally referred to as basic and collective needs of the people. The direct provision of basic needs such as health, education, food, water,sanitation and housing facilities check
social backwardness.

Determinants of Economic Development:
Economic development is not determined byany single factor. Economic development
depends on Economic, Social, Political and Religious factors.

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