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INDICATORS OF DEVELOPMENT 11 C HAPTER 2 Indicators of Development Introduction You may recall that we have defined economic development as a process but also referred to it as a level. In this sub- unit, our attention would be focussed on the level of development achieved at a given point of time (given year). In fact, in this conception, you may note that growth is a quantitative change between two levels of development or levels of development at two points of time. Growth is basically an inter-temporal comparison. For comparison between two economies, which we often resort to, there exists no such term. But such a comparison is often made. Most people would agree that development is a process and the process is multi-dimensional. When any process is conceived as multi-dimensional, it becomes difficult to adequately capture its character through any index. However, some attempts have been made to measure the level. We shall discuss four alternatives to measure the level of development: Per Capita Income, Physical Quality of Life Index, Human Development Index and Quality of Life Index. Per Capita Income Gross domestic product is supposed to measure the level of output produced by the economy during an accounting period . However, the command of people over goods is somewhat different than GDP. We have our property outside our own national economy and some of our nationals work in other countries. As a result, we earn wage income or property income outside the country. Similarly, foreigners have property in our economy and some foreigners do work here. Adjusting for these incomes, we get gross national product (GNP). In the case of large countries and countries having little interaction with other countries for factors of production, GDP and GNP are not very different. But, there are economies where GNP and GDP are quite different. In our case, GNP is somewhat less than GDP. It may be noted that GNP better represents the entitlement of the nationals of a country (individuals and their collectivities) while GDP actually shows the output of the activities carried out within the economic boundaries of the country. Still further, we should take account of consumption of fixed capital in the process of production. We should ensure that the capital stock is kept intact during the year; otherwise, we shall, one day, eat away the whole of our fixed capital. So, we should subtract that amount of capital, which we think has
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12 INDIAN ECONOMIC DEVELOPMENT been consumed in the process of production. Then, what we shall get is known as Net National Product (NNP). Net national product is also known as the national income. We shall use a particular version of net national product known as net national product at factor cost and designate as NNP FC . Now, if we want to compare the
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This note was uploaded on 04/20/2010 for the course CEDT 601 taught by Professor Ypr during the Spring '00 term at Indian Institute of Technology, Kharagpur.

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