GDP — an indicator of the prosperity of a ‘selected’ elite

I am sure many of you are rejoicing at what the papers had to say yesterday. India's gross domestic product (GDP) is going to shoot up even beyond the 9% we had hoped it would reach. Yippee. But stop a minute and let us see what GDP really means, and what it measures.

We live in the belief that GDP indicates growth and that the larger the figure the faster we are growing - or the faster everyone is getting richer! The GDP is a total of all money transactions in the country in a year or the amount of money that changes hands.

Food and trade analyst Devinder Sharma explains this well. So, if we plant a tree there is no growth. If you cut it down, the GDP goes up, for you have paid someone to cut it (transaction one) and then you sell it (transaction two). So, the disaster wrought by the large scale felling of trees, which costs us lots in the form of environmental damage, loss of green cover, loss of a carbon dioxide sump, loss of top soil, fauna and flora, wildlife and forest products, is considered a growth of the economy, and the growing of trees, which brings the reverse - breathing lungs for the country, forests and forest products, rain, a safe haven for wildlife and more, is considered worthless. Does it strike you as being fishy as a measure of growth?

Moreover, even if you still buy the GDP = growth for all argument look at these facts. According to Sharma, an analysis of last year's GDP of 7.9% shows that one fourth, 2% is dependent on just 30 hugely rich families. If these 30 families were to leave the country, our GDP would have been 5.9%. Further if you discount the 6th Pay Commission and the huge bonanza it has given to government servants, our GDP falls to just 4%! At par with the stagnant economies of Africa.

Then why do we whoop with joy just because economists and the media tell us to rejoice? This kind of GDP growth not only leaves the poor poor but also leaves a huge trail of destruction in its wake. The propounder of the GDP, Simon Kuznets himself wrote as early as 1934, "the welfare of a nation can hardly be inferred from a measure of national income". That is why some enlightened countries are rejecting GDP as a measure and adopting the GPI, the genuine progress index. In 1995 Redefining Progress, a think tank in Washington DC, developed the GPI to take into account both the economic and welfare assessments of progress. It uses 51 economic, social and environmental factors to measure genuine well being rather than just the number of times money changes hands. The GPI s the GDP minus the environmental costs of activity like resource depletion, loss of biodiversity and species, loss of farmland and livelihoods due to industrialization, increase in ozone and social costs like increases in crime and the breakdown of families.

Trish Grazebook, associate professor, Dalhousie University gives a telling example. "In India's energy sector, damming major rivers to produce hydroelectric power constitutes development. Yet decreasing fresh water input into the Bay of Bengal disrupts the monsoon cycle that supports agriculture in central and Southern India. So growth in the energy sector has lead to losses in agriculture. The GDP cannot assess that loss because the subsistence farmers' crop does not go to the market and are thus not counted in the GDP."

The fact that the farmers' families eat less and are driven to greater poverty is reflected in the GPI but not in the GDP. The GPI assesses real gains or losses in the natural capital by factoring in whether today's growth is depreciating or depleting our future and that of our children.

Eleven countries have already incorporated the GPI into their assessments of their health and that of their people. The GPI is the sole economic indicator that can inform on social justice, poverty alleviation and sustainable development. And surely that is what ultimately must count. Are the market economists who run our Planning Commission ready to listen?

The writer is a noted danseuse and social  activist