GDP

Measure of Economic
Health?
Group 1
 Economic Health
The Economic Health of a country is majorly determined by the following factors:
• Growth (expansion in a Nation’s aggregate yield) • Social
• Employment • Environmental
• Stability in the general price level • Institutional
• The balance of payments

More often than not, GDP is synonymous with the economic prosperity of a nation.

Gross Domestic Product (GDP) is the dollar

value of all final goods and services
produced within a country’s borders.
• It fails to indicate whether the nation's rate of growth is sustainable or not.
• It does not take into account income disparity.
• It does not consider negative externalities such as environmental destruction caused due to the production process.
• Depreciation of capital goods is not taken into account while calculating GDP.
• It fails to include goods produced in the agricultural sector for self-consumption.
• It does not consider the social factors that affect economic growth.
Human Development Index

The Human Development Index (HDI) is a statistic

composite index of life expectancy, education, and per
capita income indicators, which are used to rank
countries into four tiers of human development.

Based on the assumption that economic

growth/development does not necessarily equate to
human development or increased well-being.

Parameters:
• Life expectancy
• Access to education and adult literacy
• Years of schooling
• Equitable distribution of income
• GDP per person (gauges command over resources)
is adjusted to reflect Purchasing Power Parity
(PPP), Achievements in health
• Gender equity
 Legatum Prosperity Index
Annual ranking developed by Legatum Institute. In 2017, 149
countries were ranked by considering 104 variables which are
grouped into 9 sub-indexes. Each sub-index is given equal weight
to calculate LPI.

The 9 sub-indexes are as follows :-

1. Economic Quality - Openness of the Economy, Macroeconomic
indicators, Economic Opportunity & Financial sector Efficiency
2. Business Environment – Entrepreneurial environment, business
infrastructure & Barriers to Innovation
3. Governance – Effective, Democracy & Political Participation
4. Education – Access, Quality of Education & Human Capital
5. Health – Basic physical & Mental health, health infrastructure
6. Safety & Security – National Security & Personal Safety
7. Personal Freedom – Basic legal rights, Individual freedom &
Social Tolerance
8. Social capital – Social norms & Civic Participation
9. Natural environment – Quality of Natural Environment,
Environmental Pressures & Preservation Efforts
Genuine Progress Indicator(GPI)

Takes into account all the factors that are used to

measure GDP but additionally brings in the cost
associated with the economic activities. To fill in the gap
left by the limitations of GDP, this metric brings in the
unaccounted costs of environmental degradation (water
pollution, air pollution etc.) due to economic activities
and the unaccounted benefits like household labor,
volunteer work etc.

GPI is calculated based on three broad elements

1. Economic elements
2. Environmental Elements
3. Social Elements

The inclusion of these elements makes GPI a more

comprehensive measure of economic well being than
GDP.
Conclusion
Though GDP has its own importance, it can’t be solely used as a measure of economic health. There
are several other parameters which aren’t considered in GDP calculation. Even though the
alternatives might not be a good measure of economic health, we need amalgamation of diverse
indicators to get a good measure of economic health.
Thank You