The Need for Rethinking GDP Measurement in India

Rethinking GDP measurement in India

1. Why do we need to change how GDP is measured?

Current GDP measures economic production but does not reflect whether growth is healthy, sustainable, or equitable. For example, if a city produces more cars, GDP rises—but pollution from those cars imposes health costs, which GDP currently ignores.

2. How will natural resources be counted?

Present GDP accounts only for production. The new system will factor in depletion of natural resources as a reduction in national wealth. Example: Mining coal worth ₹1,000 crore raises GDP, but if the coal reserve value decreases by ₹600 crore, the net addition will be ₹400 crore.

3. Will environmental damage be included?

Yes. Costs arising from environmental damage will be subtracted from GDP. Example: A steel factory increases GDP by ₹500 crore, but river pollution causing ₹200 crore in cleanup and lost fish reduces the net gain to ₹300 crore.

4. What about unpaid household work?

Work such as childcare, eldercare, and cooking is currently invisible in GDP. New surveys will quantify it. Example: A woman caring for children at home contributes economic value similar to daycare services, potentially adding thousands of crores to national accounts.

5. How will inequality be shown?

If GDP grows but benefits are unevenly distributed, the new system will highlight disparities. Example: GDP per capita rises by 7%, but if the poorest 20% see no income increase, this inequality will be reflected in the measurements.

6. Will informal work be captured?

Yes. Informal sector contributions from street vendors, daily wage laborers, and small businesses will now be measured. Example: A vegetable vendor earning ₹500/day contributes to the economy but is often excluded. Including 1 crore such vendors provides a more accurate GDP.

7. Can you give a simple example?

• Old method: Mining 100 tonnes of coal increases GDP.
• New method: Mining 100 tonnes of coal increases GDP, but the value of the depleted coal reserve is subtracted, giving a balanced picture.

8. How will this benefit India?

It will provide a truer picture of development, reflecting sustainable growth. Example: Cutting forests to build highways raises GDP today, but if forest loss leads to floods costing ₹500 crore later, the new method accounts for both gains and losses, enabling better policy decisions.