Monday, December 9, 2024
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Time to complement GDP with GPI

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Editor,
The special article “Economics from the common (wo) man’s perspective” by Patricia Mukhim (ST November 29, 2024) made interesting reading and the author has raised many pertinent issues in this article. The Act East Policy was formerly a “Look East Policy” under the UPA government and they kept on looking only. I was handling this subject when I was with the Government of India. The file had become bulky but never gathered dust and when the new government came in 2014 the Look East Policy was rechristened the “Act East Policy” and not merely to look eastwards. The government of the day did act and it is work in progress. But given the situation in Myanmar I only hope that the heavy investment made by the Government of India does not become infructuous given the prevailing situation there. If the Act East Policy is to move forward India needs to take its ties with China seriously. The author of the article has rightly pointed out that in case of Meghalaya informal trade with Bangladesh would go on “no matter what the situation in Bangladesh”. Therefore, the need of the hour is to formalise this informal trade and the Government of India should improve its relationship with Bangladesh no matter what the situation is now in that country, because when trade and commerce come to an end everything else also comes to an end. In this, the worst sufferers would be the people of the North Eastern Region and West Bengal living along the border of Bangladesh or for that matter Myanmar.
Another interesting point raised by the author was the imperfectness of GDP as a measurement of progress. She advocated the need to use the Genuine Progress Index. It is a fact that Gross Domestic Product is often criticized for being an imperfect measure of economic well-being. Because GDP does not account for non-market activities such as household labour and volunteer work, which contribute significantly to societal well-being. It includes economic activities that may harm the environment, such as deforestation and pollution, without deducting the costs of environmental damage. GDP measures the total economic output but does not reflect how income is distributed among the population. A high GDP can co-exist with significant income inequality and this is the case with our country today. GDP does not consider factors that affect quality of life, such as health, education and leisure time. GDP focuses on short-term economic outputs and does not account for the sustainability of growth. It can increase due to activities that deplete natural resources, which is not sustainable in the long-run. GDP includes expenditures on activities that may have negative social impacts, such as healthcare costs due to pollution or accidents, without considering the negative effects.
These limitations highlight the need for more comprehensive measures like the Genuine Progress Index which takes into account social, environmental, economic factors and measures the quality of life to provide a more holistic view of progress.
GPI aims to provide a more comprehensive and holistic view of a nation’s progress by including the costs of negative effects related to economic activity, such as pollution, crime and resource depletion. Several countries have adopted or experimented with the GPI as a supplement or alternative to GDP. In the United States various states have implemented GPI to assess economic progress. In Canada some provinces use GPI for a more comprehensive economic analysis. Countries like Germany and the Netherlands have explored GPI. In Australia GPI is used to measure sustainable development. South Korea incorporates GPI in its economic assessments. Japan uses GPI to evaluate economic and social well-being and Brazil has adopted GPI for a more inclusive measure of progress.
However the GPI has had mixed success in the countries that have adopted it. Some states in the US have found GPI useful for policy making, particularly in areas like environmental sustainability and social well-being. However, it has not replaced GDP as the Primary economic measure. Certain provinces in Canada use GPI to complement GDP, providing a broader view of progress. It has influenced policies related to environmental and social issues. Countries like Germany and the Netherlands have explored GPI, but it remains supplementary to GDP though GPI has helped these countries to highlight the importance of sustainable development.
In Australia the impact of GPI on national policy is limited. It serves more as an additional tool rather than a replacement of GDP. South Korea incorporates GPI in its economic assessment, particularly for environmental and social policies. However, GDP remains the dominant measure. Japan uses the Genuine Progress Index to evaluate economic and social well-being but it has not significantly altered national economic policies. Brazil adopted GPI for a more inclusive measure of progress, focusing on social and environmental factors. Its influence on policy-making is growing but is still secondary to Gross Domestic Product. Overall, while the Genuine Progress Index provides valuable insights and a more holistic view of progress, it has not yet replaced Gross Domestic Product as the primary economic measure in these countries. It is often used alongside Gross Domestic Product to inform more sustainable and inclusive policies.
Is it time to use the Genuine Progress Index in India? India’s economic growth has been impressive, but it has also faced challenges related to environmental degradation, social inequality, and quality of life. The Genuine Progress Index could provide a more comprehensive measure of progress by accounting for these factors. The benefits of adopting GPI in India are because it includes the costs of environmental damage and encourages policies that promote sustainable development when it comes to the environment. By considering social factors like health, education and inequality, GPI can help address disparities and improve overall quality of life which is essential for social well-being.
When we talk of holistic development, GPI provides a broader view of progress, beyond just economic output, aligning with India’s goals for inclusive growth. But there are challenges in adopting the Genuine Progress Index in India because it requires comprehensive data on various social and environmental factors, which will be challenging to gather. Shifting from Gross Domestic Product to Genuine Progress Index would require significant changes in policy-making and economic planning. Adopting GPI could help India achieve more balanced and sustainable development. It would provide a clearer picture of the nation’s progress and help address the complex challenges it faces.
Yours etc;
VK Lyngdoh,
Via email

Skilling for prime needs of life

Editor,
Having been very much impressed with the article ‘Economics from the common (wo)man’s perspective’ by Patricia Mukhim (ST Nov 29, 2024), I would like to add that we are in fact wide off the mark for the common people are being fed with a learning process that defies any solution of consequential needs of a society steeped in poverty. It needs to be turned around with a new model of inclusive growth.
Meghalaya has immense scope as far as tourism, horticulture, wine-brewing and assorted sustainable agricultural practices are concerned and with the right amount of thrust and pinpointed target, the State’s economy could be transformed beyond recognition.
At the same time Meghalaya’s rich pristine glory and culture has to be protected and prospective development should be a fusion between the prime needs of life, liberty and skilling, re-skilling, keeping in mind the present technological advancements.
Yours etc.,
Tanuj Goswami
Assam

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