Unravelling GDP growth II: Why GDP measures output, not people's well-being
In this second and concluding part, the focus is on why GDP came to measure the quantity of goods and services produced, ignoring social and environmental costs such output imposes on society

- Jun 30, 2020,
- Updated Jul 2, 2020 8:22 PM IST
On May 30, 2020, when migrant labourers were very much walking and cycling hundreds of kilometres with luggage, kids and elderly, senior journalist P Sainath revealed a facet of India's approach to growth.
Recalling his experience of mass migration that agrarian crisis had triggered during 1994-2004, he wrote in India Today: "This (distress migration) was happening across the country. But we romanced our growth numbers, reminding me of Edward Abbey's famous line: Growth for the sake of growth is the ideology of cancer cell. We were in celebratory mode, though, and those pointing to rising rural distress were ridiculed." Abbey was an American author and environmentalist.
The average growth during 1994-2004 was 6.2%. The era of high growth in post-liberalised India had begun and was relished. But that sidestepped a massive agrarian distress that built up and continues even now.
For decades, search is on to find an alternative to GDP.
Many multinational agencies, think tanks, and academic institutions have tried their hands.
One such effort by the UNDP led to the institution of Human Development Index (HDI), in which Nobel laureate Amartya Sen, a development economist, played a key role.
HDI measures achievements in key dimensions of human development: health (life expectancy), education (years of schooling) and standard of living (per capita income). Its reports are released annually since 1990 and it complements GDP as well.
Another is the Human Capital Index (HCI) launched by the World Bank in 2018. HCI measures the amount of human capital that a child born today can expect to acquire by age 18, given the risks of poor health and poor education that prevail in the country where he/she lives. This is aimed at boosting social sector investments (health, education, social security etc.).
Yet another is the Social Progress Index (SPI), which maps social progress and complements GDP, rather than replace it. It has been developed by a non-profit organisation, Social Progress Imperative. Launched in 2013, it measures outcomes in areas from shelter and nutrition to rights and education and is designed based on the writings of Sen, Stiglitz and others.
The search continues.
Here is the rub.
So long as measuring the quantity of output (GDP) remains the yardstick, well-being and development of people will not be the focus of economic activities or growth.
GDP actually sits quite well with neoliberal economics and money-driven politics.
On May 30, 2020, when migrant labourers were very much walking and cycling hundreds of kilometres with luggage, kids and elderly, senior journalist P Sainath revealed a facet of India's approach to growth.
Recalling his experience of mass migration that agrarian crisis had triggered during 1994-2004, he wrote in India Today: "This (distress migration) was happening across the country. But we romanced our growth numbers, reminding me of Edward Abbey's famous line: Growth for the sake of growth is the ideology of cancer cell. We were in celebratory mode, though, and those pointing to rising rural distress were ridiculed." Abbey was an American author and environmentalist.
The average growth during 1994-2004 was 6.2%. The era of high growth in post-liberalised India had begun and was relished. But that sidestepped a massive agrarian distress that built up and continues even now.
For decades, search is on to find an alternative to GDP.
Many multinational agencies, think tanks, and academic institutions have tried their hands.
One such effort by the UNDP led to the institution of Human Development Index (HDI), in which Nobel laureate Amartya Sen, a development economist, played a key role.
HDI measures achievements in key dimensions of human development: health (life expectancy), education (years of schooling) and standard of living (per capita income). Its reports are released annually since 1990 and it complements GDP as well.
Another is the Human Capital Index (HCI) launched by the World Bank in 2018. HCI measures the amount of human capital that a child born today can expect to acquire by age 18, given the risks of poor health and poor education that prevail in the country where he/she lives. This is aimed at boosting social sector investments (health, education, social security etc.).
Yet another is the Social Progress Index (SPI), which maps social progress and complements GDP, rather than replace it. It has been developed by a non-profit organisation, Social Progress Imperative. Launched in 2013, it measures outcomes in areas from shelter and nutrition to rights and education and is designed based on the writings of Sen, Stiglitz and others.
The search continues.
Here is the rub.
So long as measuring the quantity of output (GDP) remains the yardstick, well-being and development of people will not be the focus of economic activities or growth.
GDP actually sits quite well with neoliberal economics and money-driven politics.