GDP growth in India has been on a downward spiral. It is now projected to reach a ten-year low of 5% by the end of the 2012-13 fiscal. Gone are the heady days of 8-9% GDP growth. But, is it growth that we should be chasing, or rather development?
It is widely known that India's GDP growth figures are highly imperfect. The index of industrial production (IIP) data is also volatile and unreliable. Industrial growth figures have had to be drastically revised when the annual survey of industries is available with a time lag. In December, India's industrial production unexpectedly shrank by 0.6% for a second straight month, after shrinking 0.8% in November. This data was weighed down by weak investment and consumption demand. This cast doubt over whether India is showing signs of recovery. The monetary policy cut should help somewhat in this matter. Nonetheless, export growth, which accounts for a quarter of GDP, is in the negative this year, from 21% previously. Agricultural output, which accounts for 20% of GDP, is also down by half, also affecting growth rates. This is according to data from an article in the Business Standard (BS).
But, rather than obsessing over changes in the GDP growth number, shouldn't policy makers also look at human development indicators. These points help determine overall well-being in the country. Aren't indicators such as status of women, adult literacy, quality of governance, public expenditure on healthcare, poverty, sustainability, etc important? Shouldn't these deserve a mention? Spending on healthcare, infrastructure and education can be announced in budget after budget. However, if the implementation is poor and there are leakages in the system then the result will always be below par. As per the United Nations, Human Development Index - 2011 (the new one will get published in March 2013), India ranks a low 134 out of 187 countries. While income growth is important, it shouldn't come at the cost of the citizens in the country. Rather than just growth targets, we believe that policy makers must focus on these indicators as well, in order to achieve more balanced and sustainable growth in the country.