Gross Domestic Problems

India's economic trajectory has failed to fulfil its demographic promise

- Anand Teltumbde

ON May 25, India’s NITI Ayog declared that the country has surpassed Japan to become the world’s fourth-largest economy. Ministers hailed it as proof of India’s unstoppable rise. They also said that India is poised to displace Germany from the third rank in the next two-and-a-half to three years. News channels ran marathon debates, infographics blazed on social media, and bhakts flooded timelines with hashtags proclaiming economic victory. Some YouTubers and portals indulged in refuting it, saying not yet.

I often wonder why they have to go stepwise and not declare that India has surpassed even the United States and has become the top economy in the world. There is a faithful janta that would believe it anyway. It does not have to know what Gross Domestic Product (GDP) means and what it does. It is just a matter of swelling one’s chest with pride that under the infallible Modi, India is winning the world, becoming the vishwaguru. Tomorrow, if for some reason, they had to say that they would take more than three years to surpass Germany, the faithful would never question it either.

The GDP Game

GDP is widely regarded as the foremost indicator of a nation’s economic health, representing the total monetary value of all goods and services produced within its borders. Economists primarily compute GDP through two approaches: the production approach, which sums up the value added at each stage of economic activity across sectors like agriculture, industry and services; and the expenditure approach, which aggregates total spending on final goods and services; including household consumption, investments, government spending and net exports. While both methods are valid and often reconciled with each other, India uses a cocktail of both: primarily the production approach, supplemented by expenditure-side estimates through the Central Statistics Office (CSO) and periodic supply-use tables.