29 March 2024 : Indian Express Editorial Analysis

• The Indian economy has demonstrated a growth rate of 7-8% in recent times, showcasing apparent resilience post-pandemic.
• However, uncertainties loom due to measurement issues, particularly concerning the GDP deflator.
• This analysis will delve into the complexities surrounding these measurement challenges and propose potential solutions.

• The country’s GDP is presently computed with the base year of 2011-12 which is now more than 10 years old.
• GDP estimates based on an outdated base year would not adequately capture new activities being undertaken in the economy.

VARIATION IN GDP FIGURES DUE TO DISTINCT METHOD OF CALCULATION

• As India’s GDP is calculated using three methods.
• Each method produced distinct result led to variation in data due to their assessment method which create confusion.

DON’T TAKE INTO ACCOUNT SURVEYS

• Ministry of Statistics and Programme Implementation (MoSPI) has not come out with the results of various surveys like the consumer expenditure survey and the annual survey on unincorporated enterprises which are crucial for the base revision exercise.

IMPACT ON PUBLIC PERCEPTION

• Experts express concern that presenting an overly positive image of economic growth through GDP figures can mask the economic struggles and challenges faced by a significant portion of the population.
• This can impact public perception and policy decisions.

CANT ASSESS INCOME INEQUALITY

• GDP does not account for income distribution in any way i.e distribution of income amongst and within households or different economic classes in given societies is not captured by GDP data.
• Therefore, much of the work done by people today remains under-measured or largely unaccounted for.
• For most studies measuring and accounting for trends in income inequality, survey methods based on consumer spending and consumption behaviour are used and relied upon.

CANNOT CAPTURE WELL BEING AND GREEN GROWTH

• However, GDP has been the main way in which success has been measured but it is designed to measure only production capacity and economic growth.
• GDP was not designed to assess welfare or the well being of citizens. It does not capture green growth and environmental sustainability.
• Therefore, GDP is a limited measure of a country’s development success, as it ignores other important factors.

NO NEW FRESH SURVEYS

• New indicators are required based on fresh surveys. But no new survey of the unorganised sector has been conducted since 2015. Even the census has not been conducted in 2021.
• So the method used is seriously flawed. Finally, projecting the past annual numbers and dividing by four to get the quarterly figure is also seriously flawed when there is a shock to the economy at some point during the year.

DISCREPANCIES IN GDP CALCULATION

• An analysis of the GDP expenditure components reveals a concerning trend that there is an unexplained gap in the GDP calculation.
• It raises questions about the accuracy of the reported economic data.

• The analysis highlights a significant demographic shift expected in India over the next three decades, as indicated by a report in The Lancet.
• It projects a considerable decrease in the total fertility rate (TFR) to 1.29 by 2050, accompanied by a substantial increase in the proportion of the elderly population, with one in five individuals expected to be above the age of 60 by mid-century.
• This demographic transformation underscores the importance of proactive preparation by policymakers to address the challenges posed by an ageing society.

• Global trends in Total Fertility Rate (TFR)

• • Researchers estimate that by 2050, 155 of 204 countries (76% of the world) will be below the replacement level of fertility.

• The number of countries and territories below replacement level is predicted to further increase to 198 (97%) by 2100.

• • This means that in these locations, populations will shrink unless low fertility can be offset by ethical and effective immigration.

• Decline in India’s fertility rate
• In India, the TFR was 6.18 in 1950 which reduced to 4.60 in 1980 and further declined to 1.91 in 2021.

• • TFR at 1.9 is below the necessary replacement fertility level of 2.1.

• • It is projected to dip further to 1.29 in 2050 and 1.04 in 2100.

• Livebirths in India

• • In India there were more than 1.6 crore livebirths in 1950 and over 2.2 crore in 2021. The number is projected to fall to 1.3 crore in 2050.

Why fertility went down in India?

• Role of Family Welfare Programme

• • Post-independence, there was a need to restrict the population. So, the Family Welfare Programme, including maternal and child health-related cash transfer inducements, were intended to convince people to have no more than two children.

• • Slowly that behaviour change started showing up.

• Small families became the norm

• • Infant mortality declined substantially because of various maternal and child health-related programmes and successful immunisation.

• • As a result, child survival was guaranteed and hence small families became the norm.

• Economic factors
• With development, the inter-generational flow of wealth has reversed.

• • • This means parents now do not receive much benefit from their children the way they used to.

• • • Now, elderly parents may find themselves relying less on their children for financial support.

• • Instead, they might depend more on their own savings, retirement plans, or government assistance programs.

• • This has influenced their decision to have an additional child that would involve a substantial cost of bringing them up.

• Rise in Female literacy and women’s participation in the workforce

• • Career consciousness, financial returns and economic independence have meant that women are reconsidering their options of having a second child.

What are long-term consequences?

• The consequences of fertility decline will be that the share of the elderly in the population will increase sharply.

• • By 2050 the share of senior citizens in India will be more than 20%.

• It will also lead to challenges like labour force shortages and potential social imbalances due to gender preferences.