Question

18. Which of the following aspects are neglected in GDP?​

Answer 1

Question

Which of the following aspects are neglected in GDP?​

Answer:

GDP Is Not a Measure of Human Well-Being

• GDP was not designed to assess welfare or the well being of citizens.
• It was designed to measure production capacity and economic growth.
• Yet policymakers and economists often treat GDP as an all-encompassing unit to signify a nation’s development, combining its economic prosperity and societal well-being.
• It’s time to acknowledge the limitations of GDP and expand our view of development to include welfare.

• A number of countries, including India, are paving the way.

More to know

6 Main Factors Affecting GDP

# 1. Leisure Preference: Due to technological progress, average productivity of resources (including manpower) has gone up in most industrialised countries.

# 2. Non-Marketed Activities:

All economically important activities are not bought and sold in market. With a few exceptions, such as government services, non-marketed economic activities are omitted from GDP. An example is unpaid housekeeping services. Another example is voluntary services of NGOs such as volunteer free service and education services offered free of cost to poor children in slums. Such unpaid and un-priced services, no doubt, increase social welfare. But they are omitted from GDP, because it is difficult to estimate their market values.

# 3. Underground Economy:

Many activities are performed unofficially. The underground economy includes both legal and illegal activities from informal (private) nursing, house cleaning or child care to organised crime. House cleaners or plumbers are paid in cash. Such transactions go unnoticed by the tax authorities. However, such activities have a welfare implication. No doubt, they may enhance or reduce social welfare.

# 4. Environmental Quality and Resource Depletion:

China and India have recently achieved tremendous growth in real GDP and are cited as two models of globalisation. But in expanding their manufacturing base, both countries have also suffered from a severe decline in air and water quality. Increased pollution certainly reduces the quality of life. But because air and water quality are not bought and sold in markets, the Indian GDP does not reflect this downside of its economic growth.

# 5. Quality of Life:

Various factors make a particular town or city an attractive place to live. Some of these desirable features get reflected in GDP: spacious, well-constructed homes, good star hotels and restaurants, a variety of entertaining and high-quality medical services. However, other indicators of good life are not sold in markets and so may be omitted from GDP.

# 6. Poverty and Economic Inequality:

With increase in per capita income, the incidence of poverty often goes up. So, social welfare diminishes. This is what has happened in India over the plan period. Although India has achieved a satisfactory growth rate in recent years, the planners have failed to alleviate poverty in 56 years.

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