UNDERDEVELOPED AND DEVELOPED

ECONOMIES

Meaning of Economy:-“ECONOMY” refers to all those activities and arrangements which the citizens of a country , either individually , or collectively , undertake to satisfy their wants of food , clothing , shelter , etc.

Classification of Economy:-Economy is classified in several ways :-Underdeveloped EconomyDeveloped Economy

UNDERDEVELOPED ECONOMY:-An underdeveloped economy is that economy in which , owing to the vicious circle of poverty , resources are not fully utilized . Per capita income remains low along with low standard of living of the people . According to “M .P. Todaro” :-“ Underdeveloped economy is that economy in which there are low level of living , absolute poverty , low per capita income , low consumption levels , poor health services , high death rates , high birth rates , and dependence on foreign economies”

CAUSES OF UNDERDEVELOPMENT:-

The main causes of under development can primarily be divided in two parts: (i)Economic causes (ii) Non-Economic causes . (i) Economic Causes1) Market Imperfections2) Inflexible Economy3) Vicious Circle of Poverty4) Lack of Capital Formation5) Problem of Population6) Lack of Modern Enterprise and Management

7) Technical Obstacles8) International Obstacles.

(ii) Non-Economic Causes1) Social Causes2) Religious Causes3) Political Causes4) Administrative Causes.

ECONOMIC DEVELOPMENTUnder traditional approach , economic development of a nation means increase in national income . Later increase in per capita income came to be treated as economic development . But in recent years , economic development means improvement in health facilities , educational facilities , improvement in overall quality of life of living along with increase in per capita income .Two main approaches regarding meaning of economic development are as under :(i) Classical View (ii) Modern View

FEATURES OF ECONOMIC DEVELOPMENT

1) Increase in real national income2) Increase in real per capita income3) Reduction in income inequalities4) Structural changes5) Growth over long period6) Human development7) Reduction in poverty8) Institutional development9) Infrastructural development

NEED OF ECONOMIC DEVELOPMENT Increase in national income and per capita income High standard of living More capital formation Less dependence on agriculture Full utilization of natural resources Self-sufficiency Increase in employment avenues Solution of vicious circle of poverty Formation of human capital

DETERMINANTS OF ECONOMIC DEVELOPMENT

Determinants of economic development are divided into two categories . This can be expressed in the form of a formula as under :

G=f( x + y)(Here , G=economic development in a given

period , f=function , x=economic determinants , y=non-economic determinant)

Determinants of economic development

(i)Economic determinant

(ii)Non-economic

determinant

(I) Economic determinants of economic development

Natural resources Labour or human resources Structural change Size of the market Capital formation Capital-Output ratio Scientific and technical progress Financial stability Able entreprenuers and organisation Development planning

(ii) Non-Economic determinants of economic development

Desire for development Spread of education and skill formation Political determinants Social determinants Religious determinants Freedom from corruption Law and order situation