Opinion
India’s economy as third largest: Just a guarantee of the inevitable
Summary
The size of a country’s output matters but says little about the well-being of its people and the dignity with which lives are ledRecently, Prime Minister Narendra Modi said that India will be among the top three economies in the world during his third term, presuming the Bharatiya Janata Party wins next year’s Lok Sabha elections. “On the basis of [our] track record, in the third term of our government, India will become the world’s third-largest economy. This is Modi’s guarantee," the Prime Minister said while speaking at an event in New Delhi. What he did not mention is that his ‘guarantee’ is self-fulfilling in that no matter who is PM after elections, India will become the third largest economy in a few years. Population and economic growth will ensure a larger economy. With more people than in any other nation, it would be unfathomable to have a shrinking economy, as that would mean mass penury.
A day after the Prime Minister spoke, the State Bank of India issued estimates indicating that the Indian economy would become the third largest in 2027. This must all seem like good news for Modi and the ruling BJP’s prospects in the upcoming general elections. Over the last several years, BJP leaders from the Prime Minister down have talked up India’s gross domestic product (GDP), sometimes setting a goal of a “$5 trillion economy" and at other times showcasing India’s improving GDP ranking globally as a way of inspiring nationalistic fervour among citizens. This has become an obsession that has little to do with the well-being of most Indians, however, and may in fact distract from opportunities to meaningfully improve the lives of ordinary citizens.
While economists view GDP as an overarching indicator of an economy’s health, they focus more on economic growth or levels of per capita income than on the absolute value of GDP. If GDP rankings were a measure of well-being, our first Prime Minister Jawaharlal Nehru would have celebrated India’s 8th largest economy rank in 1960 when much of the country lived in extreme poverty. Japan has had one of the world’s three largest economies since the mid-1960s but has stagnated for several decades and no longer serves as an inspiration for emerging economies.
Elevating the overall size of an economy as the singular measure of progress and well-being is a dangerous delusion. No wonder US Senator Robert Kennedy famously said that “GDP measures everything except that which makes life worthwhile." As Nobel laureate Joseph Stiglitz points out, GDP “does not measure health, education, equality of opportunity, the state of the environment or many other indicators of the quality of life. It does not even measure crucial aspects of the economy such as its sustainability: whether or not it is headed for a crash." It is not just Western economists who caution us against relying too much on GDP numbers. Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister, co-authored an article in the Harvard Business Review with the title ‘GDP Is Not a Measure of Human Well-Being.’ Writing with Amit Kapoor, Debroy asserted that “… modern economies have lost sight of the fact that the standard metric of economic growth, gross domestic product (GDP), merely measures the size of a nation’s economy and doesn’t reflect a nation’s welfare."
What if India magically became the third largest economy tomorrow? What will Indians feel besides a momentary pride that India is now in third place compared to its eighth place in 1960? How will life change for school kids who can’t read basic text or do simple arithmetic? What about the millions of Indian kids who remain in the grip of unrelenting malnutrition? Will India’s third place bring down youth unemployment from its current dizzying levels? Will we make a dent in the deficit of 200 million jobs that India confronts based on global averages of worker-population ratios? Will Indian women suddenly take their rightful place in the Indian jobs market after years of declining participation in the country’s labour force? Will the fruits of India’s progress suddenly be shared more broadly?
For a dignified life, other things matter too—that you will not be paraded naked by a mob or gang-raped, that you will not be lynched because you practice a different faith, that you will not be denied a sip of water or the shelter of a home, that you will not be called unpatriotic and worse if you don’t subscribe to a particular ideology, that you will be able to live freely in pursuit of life’s happy moments as well as moments of contemplation, and that you will live as an equal of your fellow citizen. It is self-serving to highlight India’s GDP rank and deny other ranks such as on hunger (107/121), gender gap (127/146), press freedom (161/180), economic freedom (131/176), intellectual property (42/55) and perceptions of corruption (86/107).
It would be hypocritical of me to completely deny the value of an economy’s size. After all, economists spend a lot of time poring over GDP data. But GDP must be used in concert with other measures of well-being for a fuller view of an economy’s capacity, its performance and the benefits that accrue to individual citizens.
Perhaps the ruling party is clutching at straws, given the widespread distress that is becoming evident. But the more one focuses on straws, the more likely one is to drown. I can guarantee that.
These are the author’s personal views.
Salman Anees Soz is an economist, author and deputy chairman of the All India Professionals’ Congress.
