Well done to the fastest growing economy using a new reporting time series and methodology. Let the champagne flow into the flutes held by its 1.3 billion citizens. The country is now on course to consolidating its unique story in resurgent Asian Century.
This is the story that has been spun out. Here are some truths! Or perhaps you may wish to call them ‘alternative facts’!
1. GDP doesn’t always capture the whole story of economic growth. It represents only a snapshot of variables across a time series in a reporting economy. Libya for example has a GDP growth of 21% in 2018, even the Maldives at 8.8% statistically is better than India.
2. GDP doesn’t take into account income equality or inequality very well.
3. The Population size of a reporting economy also affects GDP increase or decrease.
4. Not all GDP reporting sectors contribute positively to the economy, e.g spending on defence services and manufacturing.
5. India’s external Debt-GDP Ratio has increased to 20%.
6. Household’s Net financial saving has decreased to 6.7% in 2017 vs the corresponding year.
7. India’s External reserves of $450 billion is high for the region. But shouldn’t this be viewed in comparison with China’s $3.6 Trillion reserves, Saudi Arabian ($486bn) , Hong Kong ($437Bn) , Japan ( $1.2 Trillion) to see how far a nation with some much potential and population should accumulate? This could be wiped out by a weakening rupee and higher oil prices.
8. Crude Oil prices in an economy that still imports over 70% of national demand will always have a major impact on inflation and GDP growth.
9. The Government ‘s fiscal deficit is rapidly increasing.
10. The unemployment rate during the first quarter of 2018-19 at 5.5% is higher than that of the corresponding year (4%).
11. One of the youngest countries in the world has failed in many sectors to take advantage of its ‘demographic dividend’.
12. The middle class is growly slowly and struggling to upskill and meet new disruptive challenges. The informal sector still dominates using a very low skill base.
13. Inequality is very real. India’s top 1% of earners control 22% of its national income. Over Rich Indians have banked over $30bn worth of assets in just Switzerland. Indian has now over 121 $ Billionaires, 19 more than in 2017. A toast to the open economy that creates 19 billionaires every year and let’s forget the 124 milion who live in absolute poverty.
14. Crony capitalism is real. One of its largest mining firms is facing a$4bn tax fraud allegation. Several high profile crony scams are still progressing through its institutional morass. Have you wondered why India’s reserve bank has mentioned Mauritius as its strongest route of inward FDI ? Coincidence?
In short, focussing on GDP as a value of economic growth is a short term and myopic misrepresentation of what really matters in a globalised world.
”The welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP”- Simon Kuznets
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Some additional reading if you are not heady yet!
A. The World economic forum has a series devoted to the misuse of GDP and why economies should move beyond GDP. It can be found https://www.weforum.org/…/what-is-gdp-and-how-are-we-misusi…
B. The great GDP swindle by Joseph Stiglitz can be found on https://www.theguardian.com/…/economics-economic-growth-and