It's Pariksha Pe Charcha season - that annual reminder to parents not to turn board exams into a national emergency. Marks hide a lot: stress, health issues, mental pressure, sometimes even shortcuts. There are a lot of compromises in this race that don't go on the report cards. GDP works the same way. We chase one shiny number, ignore the mess — social, political and environmental — behind it, and still call it success.
GDP Background
The gross domestic product is a wartime fallout. The US government appointed Simon Kuznets to measure the actual output of the economy. The objective was very practical: how much output was being produced, how much had been lost because of the war, which sectors were contributing, and where resources should go.
Within a few years, however, Kuznets himself became uncomfortable with how this metric was being used. He even said that GDP was not meant to see if people were actually better off. But by then, politicians and policymakers got hooked on it because it was clean, quantifiable, and comparable.
The fundamental flaw is that the GDP alone doesn't tell us how economic output was achieved. For instance, a country could keep producing more and more beer, ignoring health effects, and still raise the GDP.
Ecological Damage While Chasing GDP Goals
I would even blame economic theories and thinking. When we see a forest, we call it an 'underutilised resource'. But the moment it gets used as timber, it creates more monetary value than when it was idle. The logic: we can build factories, create jobs, and that will raise economic output.
According to a World Bank assessment, between 1995 and 2018, there was an 8% per capita decline in forest wealth in low- and middle-income countries and an 83% collapse in the value of global marine fish stocks due to poor management and overfishing.
Going 'Beyond GDP'
So what's the alternative? In recent years, international institutions have started working on better measures of welfare. In January, the UN held a conference in Geneva titled Beyond GDP. UN Secretary General António Guterres has set up a group to devise a new dashboard of measures of economic success that takes "human wellbeing, sustainability and equity" into account.
Several alternatives have been proposed over the years:
- The Human Development Index (HDI) is widely tracked and captures education, health, and living standards. But there are no quarterly HDI numbers, and it cannot explain recessions or recoveries. Also, no politician is judged based on this number.
- Genuine Progress Indicator (GPI) starts from consumption and adjusts by adding non-market benefits and subtracting environmental costs. In theory, it fixes GDP's biggest flaw. In practice, it is data-intensive and difficult to standardise.
- One of the more compelling ideas is the 'doughnut economics'. It uses a doughnut-shaped framework showing social foundations on the inside and ecological limits on the outside. Although intuitive, it hasn't been popular yet.
- Then, there is the degrowth argument. Some economists argue that the growth-chasing attitude itself should be abandoned because it will always deplete natural resources. While the idea is great in theory, it risks increasing social stress. It may be easily implemented in rich countries with already slow growth and strong welfare systems, but not in developing countries.
Most economists and policymakers aren't much interested in these measures. Markets would go furious if some politicians said they would not chase growth from tomorrow. As a result, the beyond-GDP movement remains on the back burner.
However, not all is bad. Some countries have tried doing something different. Bhutan has used Gross National Happiness as official policy since 2008. New Zealand embedded well-being priorities into its budget since 2019. Amsterdam adopted doughnut economics for its circular economy policies. But these are just a handful of examples.
Delinking Growth From Environmental Damage
This brings us to a more practical question: can economies still grow without damaging the environment? Romania offers a useful example. Between 1990 and 2023, its greenhouse gas emissions intensity fell by 88%, while absolute emissions dropped by about 75%, even as the economy continued to grow. This was driven largely by a shift toward services and investments in renewable energy, especially solar.
More broadly, decoupling growth from environmental damage has to come from technology-producing the same output with less harm. Renewable energy, electric vehicles, and cleaner production methods help move in that direction, even if none of them is perfect solutions.
So the only workable path forward seems to be this: better measurement that creates awareness of the real costs of growth, sustained investment in technology and innovation to decouple growth from environmental damage, and gradual behavioural change rather than coercion.
It's messy. It's slow and incomplete. But unless these tracks - measurement and technology - move together, the GDP debate will remain stuck exactly where it is today.
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