Gross Domestic Product (GDP) has been used as a benchmark to measure a country’s
economic health for a long time, but is it a perfect barometer for an ever evolving and
complex economy like India’s?
What is GDP?
GDP tracks the value of products and services produced in a country. India’s rising GDP
suggests growth in the country’s producing sector which means more jobs and even
government revenue. This data is vital for policymakers, but surely doesn’t tell the whole
story.
A growing GDP might not always reflect the complete reality on ground. If the benefits are
limited in the hands of a few, a larger section of people might be left behind. Another blind spot that comes with GDP is the informal sector, millions of small businesses and street vendors contribute greatly the nation’s economy but they are often unaccounted for in the GDP calculations.
And perhaps the biggest concern is the environmental cost of unchecked GDP growth as
pollution and resource depletion aren’t a factor into the equation. Balancing economic growth
with environmental sustainability is a challenge for a country like India.
Per Capita Income: And How it Adds Up
Economists have been advocating for a better measure of nation wide economic growth,
per-capita income. Which takes in account the country’s GDP and basically divides it by it’s
population, offering a better insight into the country’s standard of living.
Switzerland, though having a significantly smaller GDP compared to India, it’s much lower
population adds up to a higher per-capita income. This reflects in their superior education,
healthcare and quality of life.
Relying solely on GDP is the equivalent of judging a book by it’s cover and a country like
India needs a different approach so here’s what some experts suggest:
Composite Index: Create a Index that takes into account the GDP as well as social and
environmental factors, including per-capita income, to give us a better understanding of
where we stand.
Focus on Specific Sectors: Instead of looking at one big compiled number, focus on the
development rates of specific factors like, education and healthcare. This promotes a more
equal and sustainable growth for all and translates into a rising per-capita income improving
the living standards of the Indian Population.
