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“It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”

-Robert F Kennedy

Almost everything has changed in our lives in the last 50 years, yet we still use Gross Domestic Product (GDP) as the most common indicator to track the health of a nation’s economy. GDP measures the monetary value of final goods and services that are bought by the final user, produced in a country in a given period of time. The concept emerged in the 1940s, out of a crisis of economic measurement to manage resources for their wartime needs. The role that measurements of GDP played in World War II was crucial to the subsequent political acceptance of its values as indicators of national development and progress.

However, we have come a long way from there and most of us understand the shortcomings of GDP. Non-market output (such as household labour) is not included, quality improvements are difficult to account for and issues of distribution are completely absent. It is an imperfect measure of economic output and falls very short at gauging general well-being.It is found that many countries perform very differently if they are ranked taking into account GDP, Human Development Index, World Happiness index, Legatum Prosperity index, Environmental Performance index, Gender Inequality index and Corruption Perceptions index together, when compared to GDP alone. Each country is given points based on its rank in each index. For example, as India is ranked 5th out of 211 countries in the GDP index, it gets 206 points. Similarly, points in each index for one country are added, adjusted according to a common denominator, and then the average is calculated. Every country is assigned a final rank after its consolidated score has been averaged.

It is clear from the combined ranking that the quality of life in a nation depends a lot on other factors and not just the Gross Domestic Product. As regards to India, one can easily wonder if it’s worth being the world’s fifth largest economy or not. How many people actually get to enjoy it? How many live without basic facilities? How many are not even recognised by their own country as citizens? Answers to these questions are distressing, and we should all think of something far beyond GDP growth. The hunt for alternative models to measure a nation’s progress has spun decades, beginning from Physical Quality of Life Index developed in the mid-1970s to New Zealand’s well-being budget introduced in 2019.

Alternative Measure I – Models of Green GDP

Green GDP systems, which broadly include Genuine Progress Indicator (GPI), Happy Planet Index (HPI) and Better Life Index (BLI) aim at achieving sustainable development by taking into account various externalities, environmental degradation and resource depletion.

Genuine Progress Indicator

One of the most popular systems under Green GDP, GPI has managed to challenge GDP very closely as it includes economic, environmental and social factors into a single framework, thus providing a better picture of advancement a country has made. Most importantly, it also examines income distribution which has long been one of the major flaws of GDP. The main drawback is that GPI does not take into consideration physical and mental well-being of people, and it fails at calculating environmental costs.

Happy Planet Index and Better Life Index

Both measurements seek to combine subjective measures of well-being with objective measures of income and ecological footprint. However, these methods can be used only for select countries and do not provide a proper alternative.

Alternative Measure II – Gross National Happiness (GNH)

GNH was designed to measure quality of life or social progress in more holistic and psychological terms than other economic indicators. The term ‘Gross National Happiness’ was coined in 1972 by Bhutan’s fourth Dragon King, Jigme Singye Wangchuck, who extensively encouraged cultural development and environment preservation.

GNH seems to be the ideal approach to measure a country’s progress since its nine domains, living standards, psychological well-being, health, time use, education, cultural diversity and resilience, good governance, community vitality and, ecological diversity and resilience cover all important parameters.

But because this measure depends upon surveys, it is not easy to implement in countries with larger population and since it takes a sample of 7000 for 700,000 people, the reliability of the results remains a matter of concern. People are placed under four categories, unhappy, narrowly happy, extensively happy, and deeply happy. Of course, critics always say that happiness can neither be fully defined nor measured.

Alternative Measure III – Gross National Liveability

After analysing various indices, we have selected indicators from genuine progress indicator, better life index, liveability index and world happiness index and tried to narrow it down to those which are the most relevant and can be evaluated without much difficulty. Income level, Stability, Health, Infrastructure and Housing, and Environment and Culture are five major areas that can be taken into consideration while determining a nation’s progress.

Income level should not only focus on the size of the economic pie but also on whether it is distributed equitably or not.

Stability is another key factor as in today’s world, a country which is in higher vicinity of crime, terror and civil unrest is sure to face severe challenges that will negatively affect the people of the country in many ways. As economic aftereffects will materialise once the coronavirus crisis is over, it will become more important to gauge stability in political, social, and economic terms.

Health includes both physical and mental wellbeing of a person. General healthcare indicators as suggested by the World Bank and indicators used by World Happiness Index provide good means to track the health of the citizens.

Infrastructure and Housing is a broad term that can include public education indicators as prescribed by World Bank, availability and quality of private education and quality of telecom and road network by Economist’s Intelligence Unit, and parameters of rooms per person and dwellings without basic facilities which can be found in the Better Life Index.

In a resource-constrained and fast-paced world, not focussing on environment and culture can prove to be disastrous in the future. Parameters that check pollution and corruption in monetary or definite terms should be developed, quality of air and water be incorporated in the indices and the extent of social and religious restrictions should also be taken into account while measuring a country’s growth rate.

These facets of growth become even more important today, in a world that will require holistic development once the COVID-19 pandemic has passed.

One of the biggest learnings from a pandemic such as the one we face today is that we cannot be rigid or typeset in our ways. If anything, we must learn to be dynamic and adaptable. It is time to unlearn economic precepts and embrace the new.

By Tarini Goyal


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