Why GDP Is a Bad Indicator for India's Economic Development

 
 

The macroeconomic projections of the IMF, World Bank, and Forbes asses that India is one of the fastest growing economies in the world and that she will become the third largest economy of the world by 2030. In fact, Forbes even suggested that India might outpace China in terms of economic growth. These predictions are based on India’s Gross Domestic Product, which has been consistently growing over seven per cent per annum during the last two years. Another factor going in India’s favor is its prudent fiscal policies and ease of doing business.

The larger question, however, is whether GDP is an effective metric to determine the well being of people in a country. It is true that India is slowly emerging out of the shadow of China but, when we take into consideration other social indices like education, health services, housing, and environment, India is a laggard.

India has been ranked 97 out of the 118 developing countries by the International Food Policy Research Institute’s Global Hunger Index 2016 (GHI), released this month, highlighting the seriousness of the prevailing hunger situation in India. Even countries like Nepal, Sri Lanka, and Bangladesh have been ranked higher than India. In fact, India’s rank has slipped from 83 to 97 in the last two decades. The GHI findings should be a wake up call for India, as it needs to give more focus  on issues relating to “inequity in all dimensions, including region, caste, and gender,” if they have to be considered as an emerging global power. The study shows that, “at the end of 2016, around 15 percent of the country’s population was undernourished, although down from 17 percent at the end of 2009.” The report highlights that the prevalence of wasting and stunting in children continues to be a serious issue. India has scored 28.5 on the GHI index, which is below all other neighboring countries, barring Pakistan and Afghanistan. Further, “the report argued that even if hunger were to decline at the same rate as it has since 1992, India will still have ‘moderate’ to ‘alarming’ hunger scores in 2030.” China, despite the sheer size of its population, has been placed 20th with a “low hunger level rating.”

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Conversely, China, and other South Eastern Countries have outperformed India on many social indices like poverty, education, health care, and housing. These findings show that the gross domestic product alone is not sufficient in determining a country’s economic progress. In fact, any comparison with China is odious, as they have made phenomenal progress in reducing poverty, improving the educational standards, and making affordable health care services available to most of its citizens.

In a report published by UNICEF, India has over 61 million children where children under 5 years are stunted, as a result of malnutrition. The report says that lack of adequate food has been the primary cause of death, under-nutrition, and stunting. This, coupled with lack of water, sanitation, and hygiene practices has led to illnesses and life threatening diseases like diarrhea. The report goes on to say that as much as 50 percent of malnutrition is caused, not by a lack of food or poor diets, but due to poor water, poor sanitation facilities, and unhygienic practices.  The World Bank in its recent publication “Poverty and Shared Prosperity 2016: Taking on Inequality”  shows a wide disparity between states in India. For example, the per capita income of two of India’s most populated states, Uttar Pradesh and Bihar, is three to four times lower to India’s average annual per capita income of $1,410. India has been found to be the poorest among the world’s middle-income countries.

Any comparison between India and China is odious, as China has outperformed India in many social indices.  In fact, The World Bank President Jim Yong Kim while speaking on “The World Bank Group’s Mission: To End Extreme Poverty,”  at the World bank’s annual meeting on October 3, 2016, said that over 1 billion people of the world have escaped extreme poverty since 1990. In a special reference made to China, he said that significant progress has been made by China towards ending extreme poverty as a result of trade and the openness of their domestic industries to global competition. One of the reasons for the phenomenal progress made by China is opening up its economy to foreign investment which has made China today one of the biggest manufacturing hubs in the world.

With regard to health care, the United Nations General Assembly in its publication “Measuring the health-related Sustainable Development Goals in 188 countries: a baseline analysis of the Global Burden of Disease Study 2015,” has ranked India, despite its economic growth, 143rd out of 188 countries covered in the survey. India’s achievement in health care has been found dismal.  Among the Asian countries, India has been rated far below Singapore (85-rank 2), Japan (SDG 76: Rank 27), Korea (73-rank 35), Malaysia (SDG 69: Rank 46), Indonesia (SDG 60: Rank 91), China (SDG 60: Rank 92), Thailand (SDG 56: Rank 112,), Myanmar (SDG 46: Rank 135), Philippines (50 –rank 127). Among the BRICS Nations (Brazil, Russia, India and China), India has made the least progress in achieving the Sustainable Development Goals.

In the field of education, India is also behind China. While China has made significant progress in making quality education available to all, India needs to invest heavily in this sector as a large percentage of the population is still illiterate. The Social Progressive Index 2016 released recently, China has been ranked 84 out of 143 countries, and has been placed under the “low Middle Class Progress,” while India has been ranked 98, and has been placed under the category of “Low Social Progress.”  The study considered various indicators like Basic Human Needs (Nutrition, Water and Sanitation, Shelter, Personal Safety), Foundation of Well Being (Access to Basic Knowledge, Access to Information and Communication, Health and Wellness, Environmental Quality) and Opportunity (Personal Rights, Personal Freedom and Choice, Tolerance and Inclusion, Access to Advanced Education) for determining the ranking of individual countries.  Even smaller countries like Thailand, Indonesia, Sri Lanka, and Nepal have fared better than India when it comes to the Human Development Index. The report recommends a robust and holistic measurement framework for national, social, and environmental performance to benchmark success and accelerate progress,

The Census 2011 data released recently has revealed that as many as 7.8 million Indian children are forced to earn a livelihood, while studying, while 84 million children don’t not go to school, which represents nearly 20 percent of the children who have benefited from compulsory education, as provided in the Right to Education Act. The quality of education, especially the primary education, particularly in rural areas, is abysmal, mainly due to lack of good schools, trained teachers, and poor infrastructural facilities. It is also worthwhile mentioning that not a single Indian institution of higher education finds a place in the world’s 100 best academic institutions ranking.

The finding by various reputed international organizations shows that GDP alone is not sufficient in measuring the progress of a country, The true progress can be measured only by taking into consideration other human development indexes like education and health, which are important in measuring the well being of a people. In this regard, India can learn from the Australian model which also tracks the outcomes in education and health care.

As revealed in the Social Progress Imperative Survey 2016, India should now start focusing on critical issues like education, health care services along with the economic growth. Only emphasizing “growth,” at the cost of social progress, will only promote inequality in Indian society. This calls for heavy investment in education and health care. The present investment of around 1.14 percent of GDP needs to triple for India to make substantial progress in these sectors. Ultimately, Indian Prime Minister Narendra Modi’s leadership will be evaluated on whether he will be able to bring a qualitative difference in the lives of millions of Indians who have been deprived of the benefits of education, health, and housing.

K.S. Venkatachalam is an independent columnist and political commentator. His articles have been featured in many leading newspapers.

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