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Rethinking GDP

Rethinking GDP

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  6 Dec 2019 5:19 AM GMT

When the king of Bhutan Jigme Singye Wangchuk in 1972 coined the term ‘Gross National Happiness (GNH)’, economists were forced to take notice and re-examine their concept of what made a country (and its people) really wealthy. Rather than being a measure of the goods and services a country produced — primarily represented by the term ‘Gross Domestic Product (GDP)’ — a country’s wealth and progress should include ‘non-economic’ aspects of citizens’ wellbeing. King Wangchuk’s formulation has stood the test of time, so much so, that the GNH index now incorporates as many as 33 indicators grouped under 9 domains.

These include psychological wellbeing, health, education, time use, cultural diversity and resilience, ecological diversity and resilience, community vitality, living standards and good governance. The alternative picture of ‘good life’ that should be ensured for citizens by a country and society has been steadily gaining traction and becoming a part of conventional wisdom. Bhutan went on to enshrine in its Constitution (drawn up in 2008) Gross National Happiness as the goal of its government; three years later, the General Assembly of the United Nations in a resolution called upon member nations to follow Bhutan’s lead and consider citizens’ wellbeing and happiness as a ‘fundamental human goal’. The annual World Happiness Reports since 2012 have consistently managed to draw global attention, and in fact, the scoring of happy and unhappy countries has become progressively broad-based and subtler. This has added fuel to the raging debate over where the world stands at present with the neo-liberal economic model adopted by a majority of countries since the Nineties. However, political debate in India of late has given a different twist to the embattled concept of GDP — it is being bemoaned in quite a few quarters that what should have been a matter left to economists has been hijacked stridently by politicians with decidedly fuzzy notions of economics.

BJP MP Nishikant Dubey stirred the latest round of controversy when he intervened during a taxation law debate in Lok Sabha by asking the House whether ‘happiness is increasing or not’. Pointing out that GDP was introduced in India only from 1934 onwards, he commented that GDP should be made a ‘gospel like the Bible or the Mahabharata’ — rather, it is more about ‘sustainable development’, he thundered. The Opposition gleefully waded into the debate, with former Finance minister and Congress leader P Chidambaram tweeting ‘God save the country’; social media users are meanwhile having a field day over the MP’s remark. That India’s economy is slowing down has been apparent from the last couple of years, and the latest developments are quite disquieting. The Reserve Bank itself in its latest monetary policy review has lowered the country’s growth projection to 5 percent for the current 2019-20 financial year, while consumer price inflation rate may rise steeply to above 5 percent. The CLSA ratings forecast a gloomier scenario of the Indian economy growing at just 4.5 percent this fiscal. There is a broad consensus that the deceleration really began with the credit squeeze that hit non-bank finance companies (NBFCs) about a year back, and that the contagion is spreading to various sectors. With recession biting and companies cutting back, the employment generation outlook is getting bleaker by the day.

Finance Minister Nirmala Sitharaman, however, stoutly maintains that there is no recession, and with reforms like corporate tax cut, the country’s economy will pick up by next year. The political fallout of a slumping economy is more about massive job losses and lack of purchasing power, and the projections are that it could presently be affecting upto 70 percent of the population, particularly those in rural areas. While rival schools of economists are slugging it out with their formulations about tax and bank rate cuts vis-à-vis more government spending and pump priming, some are seeing opportunity of groundbreaking reforms. They believe that this is the best time for the government to rationalize subsidies further, step up investment in infrastructure and housing sectors, initiate land and labour reforms, encourage labour intensive production and push small to medium scale manufacturing, and really make the skilling initiative meaningful.

One thing must be clear though. The country needs in the public domain economic data that is reliable. It is not just unfortunate but downright confusing when rival sets of economists backed by political parties marshal their own data sets to beat each other. Which data set to believe, common citizens would like to ask here. Rather than ‘leftist’ or ‘rightist’ economists quibbling over GDP and its very necessity, and politicians rushing into the debate to obscure it further — it is honestly collected, reliably analysed and acceptable data that is needed. Without it, neither policymakers and stakeholders nor thinking citizens can make sense of the economic situation.

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