Raghav JhunjhunwalaAIR 4 · CSE 2025 · 259 wordsTheir whole copy
Opening · a date or context
The GDP computation methodology underwent structural change in 2015 to harmonize it with the existent International practices.
Some changes:
Body · points and prose
(1) shift from factor cost Approach to market Price Basis. GDP_FC → GDP_mp. (2) change in source of data: ex: Annual survey of Industries (ASI) data to be used. (3) change in Base-Yr to 2011-12.
India has becomes the 5th largest country by nominal GDP and 3rd largest nation by GDP in PPP terms.
→ By 2070, we can become No.2, as predicted by IMF.
Limitations of using GDP as a tool to measure development
(1) Doesn't focus on composition → Country can produce only military equipments and can still be no.1
(2) Doesn't focus on Distribution → A few people/units can produce everything and yet achieve high GDP.
(3) Doesn't focus on Environmental sustainability → NO account of Natural capital depletion → Increase in pollution which reduces both capacity & efficiency of production.
(4) Doesn't include the value of Externalities: Either positive or negative which affects the production & consumption decisions.
(5) Too simplistic; yet too complex ↓ Only output changes is measured. ↓ Calculation flows Ex: Inclusion of mining in secondary sector.
What are some better methods
(1) HDI (Human Devt. Index)
much comprehensive measure.
(2) Green GDP → Adjusting for environmental capital degradation from the GDP figures.
(3) Adjusted Net savings
Close · a summary
= Physical growth + Human capital growth - Natural Reduction.
Thus; GDP methodology can be further improved and also be complemented with other sources.
But, because of its comparability, it remains a preferred tool.
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