The Irrelevance Of Indian GDP Estimates To Most Of Our Citizens

Context: FY22 first-quarter GDP growth estimate was at 20.1% (Lower compared to 24.4% decline in FY21 first quarter). Despite the higher growth, people’s actual conditions have worsened.

Issues with GDP estimates as sole indicator of economic recovery

• Fails to account informal sector: Despite informal sector being a significant part of the overall economy and crucial for generating broad demand, GDP estimates hardly capture the extent of depressed economic activity in the informal sector.
• Fails to capture worsening scenario in employment sector: Periodic Labour Force Survey (PLFS) indicates a structural retrogression in the employment structure, that is, after more than five decades, we have seen an actual increase in the proportion of workers employed in agriculture.
• Wages are not recovering:
  • Data on casual wages in rural areas shows that real wages in agricultural occupations declined by 4.6% in the past year and 0.8% in the past two years.
  • Decline is much worse for non-agricultural occupations, with non-agricultural wages declining by 6.7% compared to last June and by 1.8% compared to June 2019.
• Farmers fared badly: Already suffering from low output prices, the majority of farmers have seen incomes decline as input costs rose (such as on diesel and fertilizers).
• Human-development to take a backfoot: Since the 2020 lockdown, disruptions in education, with significant numbers of students dropping out or unable to get educated, is unlikely to be reflected in GDP statistics. So is the case with malnutrition and other health parameters.

Conclusion: The failure of GDP to reflect the economic conditions of our population’s majority is a result of serious issues at conceptual level, the way data on GDP is calculated and infirmities of the database. Thus, the euphoria of an economic recovery is unlikely to prove sustainable when most basic indicators of human development show a worsening of our situation.