Skip to main content

The Paradox of GDP




Dr Manmohan Singh, our Prime Minister, reminded recently of the country’s economic security.  On the basis of GDP, India ranks at the 10th place in the world.  However, when it comes to per capita income the country’s rank is a pathetic 141.  We are a rich country with poor people, in other words.

GDP is the sum of all the products and services of a country.  If we calculate the sum of the entire amounts spent by the government and the private sector including individuals as well as the savings and earnings from exports and then subtract the sum spent in imports, we will get the country’s GDP for the concerned year.

Interestingly, the GDP will grow when prices rise.  When you spend more money on petrol or shopping or medicine, you are raising the GDP of your country.  If you wash your own clothes instead of paying a launderer for that, or polish your shoes instead of paying a shoeshine boy, or cook your own food instead of eating at a restaurant or some such place, you are reducing the GDP of your country. 

It’s no joke that the GDP of the country will grow when there is a catastrophe like flood or earthquake.  Because more amounts will now be spent on reconstruction works and the more you spend the higher your country’s GDP!

Do not complain when the prices of food items rise or when you have to pay huge bills in hospitals.  You are raising your country’s GDP.

The USA spends $20 million a year to advertise fast food products.  One in four Americans depends on fast food for sustenance.  And the GDP of the country grows by $110 million.  Furthermore, fast food creates much obesity and the amounts spent on slimming services a year is $30 million to $50 million. 

The irony of calculating a country’s economic growth in terms of GDP must be clear by now. Dr Manmohan Singh’s statistics sounds good on paper.  But in reality it means little.  It does mean that there are some people in India who are well off, better off than desirable, in fact.

The criteria for evaluating a country’s development should not be merely economic.  Happiness quotient has little to do with economic statistics. 

It should be noted that India’s GDP did not grow with support from agriculture and trade.  56.4% of the country’s GDP comes from the services sector.  Agriculture makes a mere 17.2% contribution.  Trade: 26.4%.  But 52% of the country’s population is involved in agriculture.  This is another paradox of GDP.

There’s no doubt that the liberalisation of economy and the policies that go with it have made much contribution to the country’s progress.  But everything is not hunky-dory, as our PM wants to make it appear.  We need to consider the conditions of the poor and the marginalised more seriously.
 

Note: I have depended entirely on an article by Saji Cyriac in today’s Deepika (a Malayalam newspaper) for this post. I found the article lucid without the usual jargon that creeps into such writing.  Hence I wished to share some of it here.      

Comments

  1. A great post about the paradoxical nature of our economy. The subject as well as the different points discussed in the post are superb.It is true that even as we need to be on the move forward, we have no choice but to think about the poor of the country to better their lot.

    ReplyDelete
    Replies
    1. I was mighty glad to read the article in the newspaper I have cited. I thought it would be a good idea to translate it, though I have condensed it considerably.
      Glad you found it good. Thanks, Kajal.

      Delete
  2. Its quite clear that this economy of ours is on life support. Might survive for 'n' number of years but will always be on ventilation.

    ReplyDelete
    Replies
    1. Not just survive, Abhinav. The original author of the article from which I have taken this says that India's economy will be at rank 4 in 2025. But we will continue to be a rich country with poor people!

      Delete
  3. Mathematical Calculations do not portray the true condition of India ... Uneven distribution of wealth is the biggest issue of Indian economy ! A country where the planning commission does not mind deriving mathematically correct and practically impossible amount of money for daily survival,can do nothing but talk about success in numbers.
    PM may befool the world and few learned who are gaining out of the political combination .. but real India,rural India has not seen any substantial change in lifestyle and whatever it has seen, govt's cooperation since last 65 years has been negligible.

    ReplyDelete
    Replies
    1. The entire rural sector has been ignored, Jack. So true. In fact, I'm witnessing the assault of neoliberal policies in rural areas in the name of infrastructure development...

      There's much that India has to accomplish before it can stake any claim to development.

      Delete
  4. I don't about other places much, the South folks seem quite wealthy to me. But in my hometown I partially blame the Communist Parties. To make everybody equal - instead of making the poorer rich, they made the rich people poor. Now Kolkata people have lost all confidence in the Communist parties, the ones who try to bring down the disparity :( :/

    ReplyDelete
    Replies
    1. It's not the ideology that makes the difference, I think, but the way it is put into practice. Marxism was a huge success in Kerala where land reforms were brought about and a kind of social justice was put in place because of the good leaders who put into practice the socialist principles. In West Bengal, Marxism failed because the state did not have real Marxist leaders. Jyoti Basu only wore the mask of a socialist. Secondly, the people also make a huge difference; there's much difference between the way the people of Kerala and those of WB looked at life in those days. Now there's no difference, however, thanks to globalisation (maybe!)...

      Delete
  5. A serious post, made more serious through the veil of silliness in the form of jokes like hire a person to open your fly at the urinals and you contribute to GDP growth. But, there are a few things I have to mention:

    One, you say, "The USA spends $20 million a year to advertise fast food products." It CANNOT be $20 million on fast food per year. It must be either $20 billion per year or $20 million per day. Please check that.

    Two, you missed out on two other glaring opportunities to increase GDP - elections and war! Let us just bomb, perhaps ourselves and the GDP shoots through the roof (include expenses for last rights)! Elections are NOT expenses. They are means of wealth creation (and accretion, to the winners, of course).

    RE

    ReplyDelete
    Replies
    1. Actally, Raghuram, the Malayalam writer mentioned it as $2000 crore. Since I thought dollars and crores don't go together, I converted it into millions. Did I calculate wrong?

      Delete
    2. Oh, forget about calculating wrong ... my point was that in the $ 15 trillion economy, $20 million for advertisement is truly a drop in the ocean; even less, perhaps.

      RE

      Delete
  6. This comment has been removed by the author.

    ReplyDelete
  7. Great post. I agree with mandakolathur's comment above. Wars are such an important source of wealth creation. There is a whole market out there, thanks to America's 'war on terrorism'. The Indian establishment is going on an all out war against it's own people so it can cater to the market demands of bauxite required majorly for making ammunition. It all contributes to GDP, doesn't it!

    ReplyDelete
  8. Sir,
    I have the same views. But I take exception to the notion of GDP shared above. 'GDP is the sum of all the products and services of a country' - partially true. In-fact, 'GDP is the sum of all the products and services produced within the geographic confines of a country'. The services of McDonalds, Volswagon, Walmart in India would add to India's GDP, similarly what Infosys, Tata, Reliance do outside India, would not add to India's GDP. Paul Krugman, once said that it is perhaps one of the most absurd concepts ever conceptualized.
    Theories in macroeconomics state that in order for a country to be characterized as a developed economy(read 'Industrialized Economy'), it must break away from being characterized as an 'Agrarian Economy'. China made this transition directly Agrarian -> Industrialized, India is making it in phases. Agrarian -> Service -> Industrialized(in time).
    India needs a streak of 'free for all capitalism'. America was built this way, UK was built this way. Rousseau's moral happiness, in my view will not pull India out of this mess, besides the idea is Utopian. For now, at least, material happiness will intensify material progress.

    ReplyDelete
    Replies
    1. Agree, GNP and GDP are different from each other.

      Delete

Post a Comment

Popular posts from this blog

The Adventures of Toto as a comic strip

  'The Adventures of Toto' is an amusing story by Ruskin Bond. It is prescribed as a lesson in CBSE's English course for class 9. Maggie asked her students to do a project on some of the lessons and Femi George's work is what I would like to present here. Femi converted the story into a beautiful comic strip. Her work will speak for itself and let me present it below.  Femi George Student of Carmel Public School, Vazhakulam, Kerala Similar post: The Little Girl

The Little Girl

The Little Girl is a short story by Katherine Mansfield given in the class 9 English course of NCERT. Maggie gave an assignment to her students based on the story and one of her students, Athena Baby Sabu, presented a brilliant job. She converted the story into a delightful comic strip. Mansfield tells the story of Kezia who is the eponymous little girl. Kezia is scared of her father who wields a lot of control on the entire family. She is punished severely for an unwitting mistake which makes her even more scared of her father. Her grandmother is fond of her and is her emotional succour. The grandmother is away from home one day with Kezia's mother who is hospitalised. Kezia gets her usual nightmare and is terrified. There is no one at home to console her except her father from whom she does not expect any consolation. But the father rises to the occasion and lets the little girl sleep beside him that night. She rests her head on her father's chest and can feel his heart...

India in Modi-Trap

That’s like harnessing a telescope to a Vedic chant and expecting the stars to spin closer. Illustration by Gemini AI A friend forwarded a WhatsApp message written by K Sahadevan, Malayalam writer and social activist. The central theme is a concern for science education and research in India. The writer bemoans the fact that in India science is in a prison conjured up by Narendra Modi. The message shocked me. I hadn’t been aware of many things mentioned therein. Modi is making use of Bharatiya Vidya Bhavan’s Centre for Study and Research in Indology for his nefarious purposes projected as efforts to “preserve and promote classical Indian knowledge systems [IKS]” which include Sanskrit, Ayurveda, Jyotisha (astrology), literature, philosophy, and ancient sciences and technology. The objective is to integrate science with spirituality and cultural values. That’s like harnessing a telescope to a Vedic chant and expecting the stars to spin closer. The IKS curricula have made umpteen r...

Joys of Onam and a reflection

Suppose that the whole universe were to be saved and made perfect and happy forever on just one condition: one single soul must suffer, alone, eternally. Would this be acceptable? Philosopher William James asked that in his 1891 book, The Moral Philosopher and the Moral Life . Please think about it once again and answer the question for yourself. You, as well as others, are going to live a life without a tinge of sorrow. Joyful existence. Life in Paradise. The only condition is that one person will take up all the sorrows of the universe on him-/herself and suffer – alone, eternally. What do you say? James’s answer is a firm no . “Not even a god would be justified in setting up such a scheme,” James asserted, knowing too well how the Bible justified a positive answer to his question. “It is expedient that one man should die for the people, so that the nation can be saved” [John 11:50]. Jesus was that one man in the Biblical vision of redemption. I was reading a Malayalam period...

The Real Enemies of India

People in general are inclined to pass the blame on to others whatever the fault.  For example, we Indians love to blame the British for their alleged ‘divide-and-rule’ policy.  Did the British really divide India into Hindus and Muslims or did the Indians do it themselves?  Was there any unified entity called India in the first place before the British unified it? Having raised those questions, I’m going to commit a further sacrilege of quoting a British journalist-cum-historian.  In his magnum opus, India: a History , John Keay says that the “stock accusations of a wider Machiavellian intent to ‘divide and rule’ and to ‘stir up Hindu-Muslim animosity’” levelled against the British Raj made little sense when the freedom struggle was going on in India because there really was no unified India until the British unified it politically.  Communal divisions existed in India despite the political unification.  In fact, they existed even before the Briti...