Development economics is a branch of economics which deals with economic aspects of the development process in less developed countries (LDCs). Its focus is not only on methods of promoting economic growth but also on improving the general well-being of common people through health, education, workplace conditions, and other aspects of human development. Development economics involves the creation of theories and methods that aid in the determination of policies and practices for economic and social security of the population at large. The purpose of economic activities going around is to produce goods and services to satisfy the wants of people. How well and to what extent these wants are satisfied is the basic issue in development economics. Traditionally, economic growth is defined as sustained increase in per capita real income of a country. However, economic growth in numbers alone, without improvement in living standards and overall quality of life, is not enough. Hence, economists insist on economic development which is a much wider term as compared to economic growth. Economic development emphasizes that everyone should enjoy a minimum level of economic security. The ultimate objective of all economic efforts is human development which encompasses quality of life, the level of well-being and access to basic social services. Thus, development today is no longer confined to growth in national income alone. Inclusive growth is the new paradigm that is related essentially to equality and opportunity for all and sundry for productive and meaningful life with freedom and equality. In other words, it means inter-group, inter-sector as well as inter-regional equity. Growth is inclusive when it creates economic opportunities along with ensuring equal access to them. The concept of development is inextricably linked with environment protection. Sustainable development is a strategy for improving the quality of human life, while living within the carrying capacity of supporting eco-system. Sustainable development is that which meets the needs of the present without compromising on the ability of future generations. The study of development economics raises awareness regarding economic policies and practices being followed in a country. It also helps in gaining a better understanding of the dynamics of development process, both at the international and domestic levels. This book explains various aspects of development economics. It would help teachers and students of the subject to understand the basic concepts, components and processes of development economics. The book contains 30 chapters which have been organized into 2 parts. Part I (chapters 1 to 15) is titled Underdeveloped Countries and Growth Models. It explains and examines the following models of economic growth propounded by economists from time to time: W.W. Rostow’s stages of economic growth, economic growth model of Robert Solow, Harrod-Domar growth model, big push model of Paul Rosenstein-Rodan, critical minimum effort theory of Harvey Leibenstein, Ragnar Nurkse’s balanced growth theory, Albert Hirschman’s theory of unbalanced growth, and Simon Kuznets inverted U hypothesis. Other topics included in this part, among others, are location of industry, infrastructure and logistics, agriculture and economic development, and public goods and the problem of free-riding. Part II (chapters 16 to 30) is titled Aspects and Approaches to Economic Development. It includes, among others, the following topics: Demographic transition theory and demographic dividend hypothesis, Harris-Todaro model of rural-urban migration, dualism and economic development, entrepreneurship and start-ups, financial inclusion and financial literacy, urbanization policies and issues, foreign trade and economic development, sustainable economic development, and globalization. CONTENTS Part I: Underdeveloped Countries and Growth Models 1. Economic Growth and Economic Development 1.1 Economic Growth and Economic Development Distinguished 1.2 Dimensions of Economic Development 1.3 Determinants of Economic Development 2. Characteristics of Underdeveloped Countries and the Vicious Circle of Poverty 2.1 Characteristics of Underdeveloped Countries 2.2 Vicious Circle of Poverty 3. Factors and Issues in Economic Development 3.1 Factors in Economic Development 3.2 Issues in Economic Development 4. Basic Problems of an Economy and Their Solution 4.1 What is an Economic System? 4.2 Capitalist Economy 4.3 Socialist Economy 4.4 Mixed Economy 4.5 Basic Features of an Economy 4.6 Basic Problems of an Economy 4.7 Solution of Basic Problems in a Capitalist Economy 4.8 Solution of Basic Problems in a Socialist Society 4.9 Solution of Basic Problems in a Mixed Economy 5. Stages of Economic Growth Propounded by W.W. Rostow 5.1 Traditional Society 5.2 Transitional Stage (or Pre-conditions for Take-off) 5.3 Take-off 5.4 Drive to Maturity 5.5 Age of High Mass Consumption 5.6 Critical Assessment 6. Economic Growth Model of Robert Solow 6.1 Production Function 6.2 Assumptions of Solow Model 6.3 Solving the Solow Model 6.4 Implications and Conclusions of the Solow Model 7. Harrod-Domar Model of Economic Growth 7.1 Harrod-Domar Model: An Overview 7.2 Warranted, Actual and Natural Rate of Growth 7.3 Importance of Harrod-Domar Model 7.4 Criticisms of Harrod-Domar Model 7.5 Harrod-Domar Model versus Solow Model 8. Big Push and Critical Minimum Effort Models of Economic Growth 8.1 Big Push Model of Growth 8.2 Critical Minimum Effort Model 9. Theories of Balanced and Unbalanced Economic Growth 9.1 Ragnar Nurkse’s Balanced Growth Theory 9.2 Albert Hirschman’s Theory of Unbalanced Growth 10. Inequalities of Income, Lorenz Curve and Kuznet’s Inverted U Hypothesis 10.1 The Issue of Inequalities of Income 10.2 Measurement of Income Inequalities 10.3 Kuznets Inverted U Hypothesis 10.4 Causes of Income Inequalities 10.5 How to Reduce Income Inequalities? 11. Factors Affecting Location of Industry 11.1 Land Cost and Climate 11.2 Sources of Power and Water 11.3 Availability of Raw Materials 11.4 Transport Facilities 11.5 Access to Capital and Market 11.6 Skilled Workforce and Managerial Skills 11.7 Area Concentration of Industrial Activity 11.8 Backward and Forward Linkages 11.9 Public Policy 11.10 Personal Considerations 11.11 Theories of Industrial Location 11.12 William Launhardt’s Location Triangle Model 11.13 Alfred Weber’s Theory of Industrial Location 11.14 Sargent Florence’s Theory of Industrial Location 12. Role of Infrastructure and Logistics 12.1 What is Infrastructure? 12.2 Why is Infrastructure Important? 12.3 Nature of Infrastructure Services 12.4 Financing of Infrastructure 12.5 Commercialisation of Infrastructure Services 12.6 Logistics: Meaning and Importance 12.7 Strategies to Improve Logistics 13.Agriculture and Economic Development 13.1 Why is Agriculture Important for Less Developed Countries (LDCs)? 13.2 Characteristics of Agriculture in LDCs 13.3 Causes of Low Productivity of Agriculture 13.4 Agro Forestry 14. Public Goods and the Problem of Free-riding 14.1 Public versus Private Goods 14.2 Pure and Impure Public Goods 14.3 Public Goods and the Free Riding Problem 14.4 Limitations of Market Mechanism 14.5 Market Failure for Public Goods 14.6 Allocative Inefficiency 14.7 Models of Allocative Efficiency 14.8 Pareto Optimality Criterion 15. Good Governance and Economic Development 15.1 Governance Defined 15.2 Importance of Governance 15.3 Three Broad Dimensions of Governance 15.4 Forms of Governance 15.5 Measuring Governance Part II: Aspects and Approaches to Economic Development 16. Demographic Transition Theory and Demographic Dividend Hypothesis 16.1 Characteristics of Population 16.2 Theory of Demographic Transition 16.3 Population as a Retarding Factor in Development 16.4 Demographic Dividend Hypothesis 16.5 Population, Social Security and Social Justice 17. Harris-Todaro Model of Rural-Urban Migration 17.1 Economic Development and Rural-Urban Migration 17.2 Harris-Todaro Model: An Overview 17.3 Assumptions of the Model 17.4 Conclusion 18. Dualism and Economic Development 18.1 Dualism and Economic Transition 18.2 Colonialism and Dualism 18.3 Characteristics of Dualistic Society 18.4 Economic Dualism 18.5 Technological Dualism 18.6 Social Dualism 18.7 Financial Dualism 19. Science, Technology and Innovations 19.1 Importance of Science and Technology 19.2 Need for Technology Upgradation in Underdeveloped Countries 19.3 Applications of Technological Advancement 19.4 Challenges for the Future 19.5 Innovations 20. Entrepreneurship and Start-ups 20.1 Entrepreneurship Defined 20.2 Who is an Entrepreneur? 20.3 Role and Importance of Entrepreneurs 20.4 Obstacles to Entrepreneurship in Developing Countries 20.5 Women Entrepreneurship 20.6 What is a Start-up? 20.7 Start-up Ecosystem 20.8 Characteristics of a Start-up 21. Micro Finance and Self-help Groups (SHGs) 21.1 History of Micro Finance 21.2 Meaning and Salient Features of Micro Finance 21.3 Micro Finance and Allied Services 21.4 Relevance of Micro Finance 21.5 Sector/Group-wise Role of Micro Finance 21.6 Micro Finance and Self-help Groups (SHGs) 21.7 Role of SHGs in Socio-economic Upliftment of the Poor 21.8 Alternative Models of SHGs 21.9 Problems of SHGs 22. Financial Inclusion and Financial Literacy 22.1 Financial Exclusion 22.2 Financial Inclusion 22.3 Origins of the Current Approach to Financial Inclusion 22.4 Advantages of Financial Inclusion 22.5 Strategies for Financial Inclusion 22.6 Barriers to Financial Inclusion 22.7 Financial Literacy 23. Inclusive Growth and Social Justice 23.1 Meaning and Dimensions of Inclusive Growth 23.2 Need for Inclusive Growth 23.3 Essential Components of Inclusive Growth 23.4 Strategy for Inclusive Growth 23.5 Target Groups for Inclusive Growth 23.6 Enabling Role of the State for Inclusive Growth 24. Urbanization Policies and Issues 24.1 Urbanization and Economic Development 24.2 Effects of Urbanization 24.3 Features of Urban Infrastructure Services 24.4 Urbanization and Local Bodies 24.5 Financing of Local Bodies 24.6 Privatisation of Municipal Services 24.7 Urban Planning 24.8 Urban-Rural Co-ordination 25. Foreign Trade and Economic Development 25.1 Why Does Trade Take Place? 25.2 Benefits of Foreign Trade 25.3 Trade and Developing Countries 25.4 Import Substitution versus Export Orientation 25.5 Effects of Trade 25.6 Changing Pattern of World Trade 25.7 Foreign Trade: A Critique 26. Foreign Investment, Foreign Borrowing and Foreign Aid 26.1 Foreign Investment 26.2 Foreign Direct Investment (FDI) 26.3 Foreign Portfolio Investment 26.4 Foreign Borrowing 26.5 Foreign Aid 27. Environment, Climate Change and Economic Development 27.1 Economic Development and Environment 27.2 Environmental Pollution 27.3 Environmental Economics 27.4 Green Growth 27.5 Climate Change 28. Sustainable Economic Development 28.1 What is Sustainable Development? 28.2 UN Sustainable Development Goals (SDGs) 28.3 Sustainable Development Framework for Mining Sector 28.4 Economic Instruments for Promoting Sustainable Development 29. Globalization and Integration of World Economies 29.1 Globalization Defined 29.2 Impact of Globalization 29.3 Globalization and Developing Countries 29.4 Globalization and Women 29.5 Future of Globalization 29.6 Integration of World Economies 30. Current Challenges Facing the Global Economy 30.1 Financial Crisis of 2008 30.2 Covid-19 and the Global Economy 30.3 Current Challenges before the Global Economy Bibliography Index ABOUT THE AUTHOR Dr. Madhusudana H.S. is presently Associate Professor, Department of Economics, Government First Grade College, Vemagal, Kolar District, Karnataka. He obtained his M.A. (Economics) and M.Phil. degrees from Bangalore University, Bangalore in 1993 and 1996 respectively. He received his Ph.D. degree from Sri Krishnadevaraya University, Ananthapuramu, Andhra Pradesh in 2005. He has participated and presented research papers at various national and international conferences. He has visited University of Malaysia and University of Singapore as a resource person. He has to his credit more than 25 publications in national and 20 publications in international peer-reviewed journals of repute. He has also published 7 books on various aspects of the Indian economy, namely Rural Development and Poverty Alleviation in India (2012), Indian Economy towards Inclusive Growth (2013), Infrastructure Development and the Role of Public-Private-Partnership (PPP) (2017), Agricultural Crisis and Farmers-friendly Reforms in India (2018), Foreign Direct Investment (FDI) and Ease of Doing Business in India (2019), Foreign Trade and Export-Import Policy of India (2020), and Disinvestment and Privatization of Public Sector Enterprises (PSEs) in India (2021).