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What is Developing Economy | Features and Definition

The term ‘Developing Economy’ is often used in economic and other contexts. In the past, it was referred to as ‘Underdeveloped’. Whichever word is used, which economy is indicated by it? This is the real question. In this article, we will know What is Developing Economy and the main features of a developing economy.

What is Developing Economy

What is Developing Economy

According to the United Nations, “a country whose actual per capita income is less than a quarter of the per capita income of the developed United States would be a developing country.” The idea of ​​the World Bank’s current per capita income figures for this classification is given in the previous chapter.

According to Jacob Weiner, “The current population of the country has a future potential to use higher capital, labor or natural resources or all of these factors to achieve a higher standard of living Or if the per capita income level is already high, the developing country can provide the same or higher standard of living to the maximum population.”

According to Eugene Staley, “Disruptive production techniques and social organization as well as universal poverty are the hallmarks of a developing economy. This poverty is not due to temporary causes but is a chronic disease. Of course, lack of natural resources is not the main cause of poverty, so it is possible to reduce it by following the path of advanced nations.”

From the above definitions the following points regarding the nature of developing economy become clear.

(1) The per capita real income in these countries is very low and the rate of growth of income may be low. The newly rich oil exporting countries are an exception.

(2) Universal poverty is the main symptom of a developing economy. The vicious cycle here is that poverty makes the country less developed and less development leads to poverty.

(3) However, these poor countries are not necessarily poor in terms of supply of natural resources. Tools may be available there, but the productivity required to use them is wasted. Also, the social organization required for productivity growth does not exist. So despite the tools, poverty appears.

(4) If the economy has the capacity to provide a higher standard of living to a growing population, then it can be called a developing economy.

Features of Developing Economy

(1) Backwardness

Developing economy is known as underdeveloped economy, underdeveloped economy, poor economy etc. All these words indicate backwardness. This backwardness is reflected in various factors.

(A) Low efficiency

Labor efficiency is often low in these countries. Geographical conditions may be one of the reasons. Also, workers do not get a balanced diet. They are addicted to other forms of entertainment. Work and living space is not conducive to health. As the means of production are old-fashioned, there are limits to the work. As a result of these various difficulties, workers in backward countries are found to be less efficient than those in developed countries.

(B) Decreased mobility

The majority of workers in this country are less mobile. The working class cannot leave their business due to lack of technical knowledge in other professions. Where the influence of stereotypes is high, even the lure of higher wages, the obscure worker remains engaged in certain occupations, due to difficulties in language, diet, dress, customs, religion, etc., the worker is not ready to move from one place to another.

The theistic approach to life, laziness, lack of motivating environment makes it difficult to move from one level to another. This means that the backwardness of these countries is reflected in their low level of professional, spatial and quality mobility.

(C) Less skill

One of the hallmarks of the backwardness of these countries is their low level of skills. Even a country with natural resources cannot progress without skilled organizers. The organizer should be motivated by financial motives, but in many places the situation is not conducive to maximizing profits. Theistic thinking overcomes pragmatism. As a result, the country lags behind due to lack of skilled organizers.

(2) Undeveloped resources

Every country has some natural resources due to the bounty of nature. The characteristic of a semi-developed economy is that whatever resources are available, they are not used adequately. They are either partially used, misused or not used at all. In that sense, they are undeveloped.

The reason for under-utilization of resources is underdevelopment. Sometimes such tools are neglected, but sometimes they lie down until favorable conditions are created.

E.g. Efforts to find oil reserves in India gained momentum when the exporting countries increased their oil prices. It completes 65% of its production with domestic products. This means that the resources in this country tend to remain undeveloped until the right conditions are created.

(3) Lack of technological progress

One of the characteristics of these countries that contributes to the situation described above is the low level of technological progress. The vicious cycle there means the country is backward. Because their technological advancement is low. Because the country is backward. But to put aside the old technology and bring in advanced technology requires a lot of capital and that is what these countries lack.

Also, due to lack of scientific research in backward countries, it is difficult to develop new technologies in the country and foreign currency should be sufficient if one wants to import from abroad. But it is not possible to have more foreign exchange reserves when the country’s exports are low. All these conditions seem to have lowered the level of technological progress in developing countries.

(4) Lack of capital

A country is short of capital. This means there is less per capita capital. Not only is the total capital in these countries less than 60, but the speed of capital formation is also very low.

According to Conin Clark, if the country’s population continues to grow by 1%, then investment must be increased at 4% per annum to sustain the current standard of living of the population.

Assuming a population growth rate of 2.25% in India, there should be 8 investments at a rate of 9% per annum. If the cost of rehabilitation is included in this then the rate should be 15 %%. In fact, it is as low as 8 to 10%.

In such a scenario, the country’s development slows down due to lack of capital. The vicious cycle of this place is that production is low due to low capital formation. So less employment, less income, less savings and finally less capital again. Indigenous savings are generally low in developing countries.

In recent times, many international organizations have been providing financial assistance to developing countries. While it is not appropriate to depend on others for development, there is no alternative to this parasitism in the present situation. Therefore, on the one hand, while seeking foreign aid, on the other hand, strengthening the source of domestic capital is the right way to go.

(5) Emphasis on primary product

According to the evolutionary stage described by Prof. Leibenstein, agriculture and primary sector are the main source of livelihood for 70 to 90% of the population of this country. However, due to general backwardness, the share of agriculture in the national income is very low. In contrast, in a developed economy, agricultural productivity is higher despite a very small population engaging in agriculture.

The goal of development is to reduce the dependence of the underdeveloped economy on agriculture. Despite the high dependence of these countries on the primary sector, the sector is not advanced. Agriculture and natural resource products are important in the economies of these countries. Much of their exports depend on this sector.

Tea and rubber are important in the Sri Lankan economy, while coffee is important in Brazil. These countries are said to be based on primary products as they account for a significant share of the country’s exports.

These countries have nothing but these commodities to value the imports they want to make for development. Industrial production is so low that there is no question of exporting it. Industrialization in developing economies is also based mainly on agricultural and primary sector production.

The Indian industries like cotton textile, jute, oil, plant, sugar etc. are still very important and the raw material required for them, cotton, hemp, oilseeds, sugarcane etc. comes from agriculture. In this sense too, the developing economy seems to depend on the primary sector.

(6) The dichotomy of the economy

If one sector of the same economy appears to be advanced while the other appears to be backward, it is described as ‘bipartisan economy’. In this sense, most economies are bipartisan. For example, advanced manufacturing techniques are used in the industrial sector of the economy. Capitalist techniques are adopted and modern capital and consumer goods are produced.

In rural areas, on the other hand, agriculture is the main occupation in which food grains are mainly produced and the production techniques are outdated. Thus the coexistence of advanced and underdeveloped sectors in a single economy reflects its dichotomy.

Another example of dichotomy is the commercial economy in urban areas and the selective economy in rural areas. While there is a dearth of various amenities, modern goods and services in the urban areas, the rural areas do not have adequate services like roads, schools, health, transportation, drinking water.

The traditional and unconventional sectors of the economy created by dichotomy are not conducive to the overall development of the country. Due to this imbalance, the country has to face many problems.

(7) Population stress

Rapidly growing population is not a problem for every country. But if the population is growing when the resources required for development are scarce or they are not being utilized to the fullest extent, it becomes a problem due to stress.

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