Alternative measures of GDP

BY
D.ASHOK
WHAT IS GDP ?

 The gross domestic product (GDP) OR (GDI)

is the amount of goods and services produced
in a year, in a country. It is the market value of
all final goods and services made within the
borders of a country in a year. It is often
positively correlated with the
standard of living
Income Approach
 This method measures GDP by adding
incomes that firms pay households for the
factors of production they hire- wages for
labour, interest for capital, rent for land and
profits for entrepreneurship.

Total factor income = Employee compensation + Corporate

profits + Proprietor's income + Rental income + Net interest
 Expenditure approach

 In economies, most things produced are

produced for sale, and sold. Therefore,
measuring the total expenditure of money
used to buy things is a way of measuring
production. This is known as the expenditure
method of calculating GDP.

 GDP = C + I + G + (X-M)
The product approach

 The product approach measures economic

activity by adding the market values of
goods and services produced, excluding any
goods and services used up in intermediate
stages of production. This approach makes
use of the value‐added concept.
NOMINAL GDP – TOP 10 COUNTRIES
Per capita gdp

 1  Qatar 88,232
 2  Luxembourg 80,304
 3  Singapore 57,238
 4  Norway 52,238
 5  Brunei 47,200
 6  United States 47,123 — 7. Hong Kong 45,277 8 
Switzerland 41,765
 9  Netherlands 40,777 9
 10 Australia 39,692 10
 127  India 3,290
Is GDP a satisfactory
measure of growth?

 Paul Samuelson, Nobel Laureate and author of

many textbook references, once described GDP
as “truly among the great inventions of the 20th
century, a beacon that helps policymakers steer
the economy toward key economic objectives”.
NEED FOR ALTERNATIVE
MEASURES?

 Wealth distribution
 Non-market transactions
 Underground economy
 Non-monetary economy
 Quality improvements and inclusion of new
products
 What is being produced
CONTINUED…..

 Externalities
 Sustainability of growth
 Quality of life
 Unpaid labor
 Intangible valuables (e.g. feeling secure)
 Real Savings
 Standard of Living
 Uneven inflationary price changes (e.g. a
housing bubble)
How to measure ?

 developed country
 advanced country,
 industrialized country,
 more developed country (MDC),
 more economically developed country
(MEDC),
 Global North country, first world country,
and post-industrial country
Definition

 Kofi Annan, former Secretary General of the United

Nations, defined a developed country as follows: "A
developed country is one that allows all its citizens to
enjoy a free and healthy life in a safe environment."[

 But according to the

United Nations Statistics Division,
 There is no established convention for the
designation of "developed" and "developing"
countries or areas
Concept – GNH (WELL BEING) ?

 coined in 1972
 BY Bhutan's former King Jigme Singye
Wangchuck
 Karma Ura, developed a sophisticated survey
instrument.
 The Canadian - Michael Pennock- "de-
Bhutanized" version
 GNH index

 GNH indicators include both objective and

subjective dimensions of life.

 objective conditions
 -educational
 - medical facilities
 – room ratios etc…
SUBJECTIVE

 less crime,
 illness,
 air pollution ETC..

 King has said that a GNH society means the

creation of an enlightened society in which
happiness and well-being of all people and
sentient beings is the ultimate purpose of
governance.
GNH VARIABLES
 PSYCOLOGICAL INDICATORS
 EDUCATIONAL INDICATORS
 TIME USE INDICATORS
 ECOLOGY
 CULTURE
 COMMUNITY
 HEALTH
 LIVING STANDARDS,GOOD GOVERNECE
ETC.
METHODOLOGY

 SCREENING
 SCREENING QUESTIONS

CALCULATION
 NEGATIVE,UNCERTAIN,NEAUTRAL,POSITIVE

SCOREING
SENT TO PROJECT SECTORS REGULATORY
BODIES…
RANKING OF GNH ?

  Norway 0.938 ()
  Australia 0.937 ()
  New Zealand 0.907 ( 17)
  Canada 0.902 ()
  Ireland 0.895 ()
  Liechtenstein 0.891 ( 13)
  Netherlands 0.890 ( 1)
  United States 0.888 ( 4)
  Sweden 0.885 ( 2)
  Germany 0.885 ( 12)
RANKING OF GNH ?

 India is the 90th happiest country in the

world, behind Bhutan(13), China(31), Sri
Lanka(13) and Bangladesh(41). It is ahead of
Pakistan(112) and Russia(172).
2ND GENERATION GNH

 A second generation GNH concept, was

proposed in 2006 by International Institute of
Management (USA).
FUTURE – GROSS HAPPINESS
INDEX
 1. Economic Wellness
 2. Environmental Wellness
 3. Physical Wellness
 4. Mental Wellness
 5. Workplace Wellness
 6. Social Wellness
 7. Political Wellness
 THANK YOU