What is meaning of economic development?

We in many occasions say that our economy is a developing economy. But what have you understood by the term economic development. Each society not only has to think of the present but also to prepare for the future. We not only build for our won comfort and security today but also make provision for our children and grandchildren. It is, however, one of the facts of man’s economic life that something cannot be had for nothing.

If we devote our resources towards the production of some goods then we must surely forgo the advantage of having some other goods. Our resources can be put to many alternative uses but their total stock at any time is limited. Therefore, to make sure that we or our descendants shall be well provided for twenty years from today, we must keep aside something from what we produce today and not use up all of it.

But how does one exactly provide for the future? To make sure that we shall have enough clothes twenty years hence we cannot simply store up some clothes today. What we have to do is to maintain the capacity for production intact, over the years, so that the output level can be maintained every year. In order to maintain capital equipment intact, while it is being subjected to wear and tear through use, we naturally have to spend some otherwise useful resources on equipment. Each year, therefore, the economy must be ready to devote a part of its resources no to consumption but to maintaining its capital equipment intact by repairing or replacing it. This is the only way that the output level can be maintained over the years. Using resources in this way for equipment rather than for consumption is called investment.