GDP Growth or People's Growth? - The Total Growth Number That Can Leave the Poor Where They Are or the Living-Standard Growth of the Bottom Half?

What is an economy? What is to be measured? If it is not about the livelihood of the entire population, why should it be even measured and valued? If it is not about the economic status of the entire mass of people, including the living status of the last person, why should it be a national number?

---

We were living through decades of scarcity. Now, for more than a decade, we are living with surplus - much more than the needs of the global population, the world is producing now. Most importantly, we're entering the era of mass production by AI-driven machines. If nearly 85% of the global population, including most of the countries except few, are deprived of a dignified life, what is the point of all these measurements modern economy is enamored of - GDP, Debt, Deficit, Fiscal Prudence?

If a single person is left out by this measure, GDP, then why should he be forced to be part of the GDP-Economy? If we live through global or national scarcity, then at least rationing is ok, but, even that rationing is generally universal, not selective. The greatest tragedy is this: not only the production of goods and services are much more than needed, even the money is plenty, as govt issue of money is not limited by gold or forex reserves and so, govt spending is limited to employ every single person and uplift all to a dignified life.

That is why the GDP which leaves out the bottom layer always, and works only for the top 10%, should not be the national economic measure.

For decades, GDP growth has been presented as the principal measure of economic progress. But GDP growth is not people growth.

An economy can grow rapidly while millions remain poor, underemployed and deprived of adequate food, housing, healthcare, education, water, energy and other essentials. The GDP number can rise while the lives of the poor remain where they are.

That is not a minor statistical deficiency. It is a fundamental problem with making an aggregate monetary measure the central objective of economic policy. When policy is designed primarily to increase GDP, then, cruelly, what matters is the expansion of measured economic activity and what happens to the people at the bottom can become secondary.

And that has consequences far beyond measurement. 

GDP Can Grow While the Economy's Real Potential Is Wasted

Consider the contradiction:

A country can have millions of people seeking productive employment, enormous infrastructure requirements, idle or underutilised productive capacity and vast unmet needs, while simultaneously reporting strong GDP growth.

People need goods and services. People are willing to work. Resources exist. Yet the resources are not adequately organised to produce what people need.

GDP can conceal this failure because it is an aggregate number. Then, the question arises, is that the agenda, hiding the failure.

It tells us that measured economic activity has increased. It does not tell us whether the additional economic activity has reached those who need it most.

The Economy Is Not GDP

The economy is the real production and consumption of goods and services by people - Food. Housing. Healthcare. Education. Water. Energy. Transport. Infrastructure. Manufacturing. Services. Care. Everything that improves human life.

Money is an instrument through which this activity is organised. GDP is a way of aggregating certain economic activity. Neither should become the purpose of the economy.

The purpose is to improve human living standards. And for a country like India, that means something very specific:

The economic progress of the bottom half matters far more than the size of the aggregate number alone.

GDP Growth Can Leave the Poor Behind

Suppose GDP grows by 7%. Does that mean the bottom half has become 7% better off? Of course not.

The additional income and production may be distributed very unevenly. Those already possessing assets, income and economic power can capture a disproportionate share of the gains. Meanwhile, a poor household may continue to struggle with the same inadequate housing, healthcare, education, nutrition and employment.

GDP has grown. But the person's economic life may not have grown at all.

This is the distinction we need to make. GDP growth is not the same as living-standard growth.

Unused Labour Is Lost Production

There is another dimension that GDP-centric thinking obscures. When a person who is willing and capable of working remains without productive employment, the loss is not merely that person's income. The goods and services that person could have produced are also lost. At the same time, other people may be going without those very goods and services.

So the problem is not simply unemployment. It is a failure to connect:

people who need work → resources that are available → production that is needed → people who need the resulting goods and services.

That is an economic failure even if GDP continues to grow.

What Should We Measure?

Instead of asking only:mHow fast is GDP growing?

We should ask: How fast are people's living standards growing? Are more people productively engaged? Are more essential needs being met? Are real incomes and purchasing power improving? Are housing, healthcare, education, water, sanitation and energy becoming accessible to more people? Is the productive capacity of the country being fully mobilised?

And most importantly: Is the bottom half moving forward?

People Growth Is the Real Objective

This does not mean that we should stop pursuing economic growth.

Quite the opposite.

India needs enormous growth in real production because its unmet needs are enormous.

We need more food, housing, infrastructure, healthcare, education, energy, transport, water systems, manufacturing and services.

We need far more productive employment.

We need to mobilise the vast real resources that already exist.

But the objective should be clear.

Not GDP growth for its own sake.

People growth.

More people productively engaged. More goods and services available. More needs met.

Higher real living standards. And a rapidly rising standard of life for those who have the least today.

The Test of a Successful Economy

A country should not be considered economically successful merely because its GDP has become larger. A country becomes prosperous when its people become prosperous. So perhaps the most important growth number for India is not GDP growth at all.

It is: Living-standard growth of the bottom half.

Because if the bottom half remains where it is while the aggregate number rises spectacularly,

the GDP may have grown.

But have the people?

---

Rajendra Rasu
The author writes on monetary systems and political economy