These data-sets managed to generate the usual commentary, controversy and divided opinions about the state of India’s economic well-being, despite a newly elected president halfway across the world stealing some of the thunder.
It might be time, though, to start talking about whether it is proper to lavish so much undivided attention on these data estimates, look at whether the numbers capture the reality of lived experiences, examine alterations or enhancements, and examine the progress of the Beyond GDP movement which many countries have adopted.
Given India’s rich legacy of formal statistical research and analysis, this could be another opportunity for Indian statistical institutions to break new ground.
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This merits discussion because an obsession with GDP as the sole indicator of all that is good and bad in an economy, coupled with the rhetoric and shrill observations accompanying it, has made GDP calculation an extraordinary statistical exercise. GDP growth is undoubtedly a vital piece of information, but it is still a single piece in a large jigsaw puzzle.
The statistics ministry provides a detailed note on the methodology adopted for compiling quarterly GDP numbers—from both expenditure and production approaches, as well as in current and constant prices.
The new methodology has already come under some fire: for example, how the deflator policy might be leading to an overestimation of real GDP or how extrapolating a small data-base to represent a much larger universe could lead to statistical distortions. But all of this is inward-looking and ignores critical external factors.
A bit of history might be instructive here.
The emergence of GDP as the unique talisman of economic well-being dates back to the post-war period when both the UK and US wanted a benchmark to understand economic trends and drive policies. The GDP metric was thereafter used in the Bretton Woods discussions to forge a post-war global order. Consequently, GDP became an article of faith with the institutions that emerged from these talks, namely the World Bank and International Monetary Fund.
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Even then, Nobel laureate and economist Simon Kuznets (credited with creating the architecture for measuring GDP) had warned against linking GDP with absolute economic or social well-being. Other economists in recent times, such as Nobel laureates Joseph Stiglitz and Amartya Sen, have also questioned the over-reliance on GDP, especially its relevance in the middle of global demographic shifts, climate change, growing inequality and rapid digitalization of the economy.
Specifically, the world’s GDP-fixation seems asymmetrical with its limited function as an estimate of production in an economy. For example, it is worth asking whether growth represented by GDP data has any element of fairness. The data on growing inequality and poverty shows that GDP is unrepresentative of skews in income and consumption distribution within the population.
GDP has, thus, become symbolic of the wedge between expert commentary on growth and the larger population’s lived experience. Second, ironically, the dogged pursuit of higher GDP growth is ruinous environmentally, especially when the planet is changing inexorably. Third, GDP falls short of properly measuring economic activity that does not either enter the market or escapes the tax net, such as household work or the many layers of the unorganized sector. Finally, GDP is notoriously blind to changes in human, social and natural capital that the economy draws upon for the manufacture of goods and services.
The search for an alternative has been in the works since the late 1970s, but gathered momentum after the 2008 US-centred financial crisis. The 1987 publication of the Brundtland Report focused attention on sustainable development, which led the United Nations (UN) to revisit its 1953 System of National Accounts (SNA). In 1993, UN made revisions to its SNA (which by then had been adopted by 180 countries) to introduce some elements of non-monetary and environmental economic accounting, followed by the 2015 introduction of sustainable development goals.
In between, a 2008 report commissioned by France and a 2011 follow-up report from the Organisation for Economic Co-operation and Development became influential touchpoints for economists and statisticians developing an alternative framework.
The Beyond GDP movement gathered some speed and, by 2024, about 28 countries had adopted some version of the framework. There is only one catch: there has been a proliferation of initiatives, tools and indicators that has led to the fracturing of this field and planted doubt among likely adherents.
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This is where India can make an impression. The Indian statistical framework for National Sample Surveys in the 1950s, under the leadership of P.C. Mahalanobis, had provided the world with a scientific and reliable survey template.
India’s statistical establishment can again provide global leadership by creating a universal indicator that truly— and comprehensively—measures economic well-being. The world needs a yardstick that is not hostage to political rhetoric or designed to artificially showcase some mythical milestone.
The author is a senior journalist and author of ‘Slip, Stitch and Stumble: The Untold Story of India’s Financial Sector Reforms’ @rajrishisinghal
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