GDP growth

GDP is Gross Domestic Product and it measures the net value of goods & services produced within the boundary of a nation-state. It means if the ‘value’ of the produced goods, i.e. manufactured product or the ‘services’ imparted will increase the net GDP. It is thus non-isolated with inflation. Inflation is basically the increase rate of the goods & services compared to any base year selected by the government for the measurement of it. If the rate of inflation is high, the final value of the goods & services will increase, it will be more expensive to be availed by the masses, by the consumers. GDP will thus tick a higher number. If the productivity or the efficiency of the processes is increased, then there will be lesser input cost which is required to create the Goods & services in the economy. This is going to raise the profit for the vendor because for the commodity sold at the same price, he had to pay lesser input for himself, he could have raised his margin. This also creates a chance to increase competition in the market by lowering the selling prices. By this way, there will be more demand in the economy since more number of people could afford it. This, in turn, will boost the production & the quantum of services. More demand will create more supply & thus the economy will flourish, inflation & GDP will rise in the long term.

There is an increasing debate about how to make the GDP more inclusive. How the GDP growth signify more that larger mass is benefitting & a number of people are coming out of poverty. This will happen when the rate of employment is high in the economy. By this way, the wage distribution both in the unorganized & the organized sector should increase. It is definitely a long term factor & both the government and private sector has a greater role to play here. As and when a private company earns a surplus, it will have to invest that amount in an area which can create more opportunity for the unemployed. There should also be the focus that people are coping up with the year on year inflation. It should reflect on their income growth. The government can do that by liberalizing the interest rate for the loan disbursement. It could easy the compliances for opening the business and startups.

Agriculture is the backbone of inclusivity in India as almost 40% of the population depends on it for their livelihood. We need better infrastructure in the rural sector. However, we are observing an increased migration from rural to urban places. People are not able to find or create opportunities for themselves in the rural sector. As in the developed countries e.g. the U.S., there is a wide range availability of the services at the rural places. People don’t have to move to urban areas for their livelihood. Better education facilities, all kind of amenities like health facilities are available because of better infrastructure & human capital which ensures the quality of the services.