AA Edit | Put people at centre of policy

Days ahead of the G20 summit to be organised in New Delhi, Prime Minister Narendra Modi has called on all member countries to switch to a human-centric welfare model from an existing one centred around Gross Domestic Product (GDP), an approach that underpins a tectonic shift in the way the global economy operates.

Ever since Russian-American economist and Nobel laureate Simon Smith Kuznets propounded the concept of GDP in a US Congress report in 1934, GDP growth has become the ultimate indicator of economic prosperity for governments across the world.

Policies in all countries are now tuned to promote faster and higher growth in GDP, which has also become synonymous with people’s welfare, though Kuznets had said that the distinction between quantity and quality of growth must be always kept in mind.

The GDP data, however, is ill-representative of people’s welfare. When the GDP concept was first framed by English economist Sir William Petty in 1695, economies were fairly dependent on labour. The turnover of a business was a factor of labour. The obvious corollary was that a well-run business would transfer wealth to a proportionate number of workers.

By this logic, if GDP increased, more people would have to be employed, leading to greater transfer of proportionate wealth. However, after industrialization, and today, with robotic manufacturing, artificial intelligence, machine learning, this logic has been defenestrated contextually from relevance.

The GDP, additionally, has several limitations in measuring economic and social progress of people, as it does not give a correct micro-level picture. The basic underlying premise of this argument is that a country could be rich, even though a majority of its people are poor.

For instance, if Apple and Microsoft with yearly sales of $383 billion and $211 billion respectively, shift their base to the world's poorest country, Central African Republic — which has a population of 57.5 lakh — the country’s GDP will shoot up from $2.2 billion to $596.5 billion, without altering the living conditions of the people in the host country, exposing limitations of GDP approach to human welfare.

Prime Minister Narendra Modi’s Sabka Saath, Sabka Vikas model is centred around India’s civilisational belief in seeking good (prosperity) for everybody — Sarve Jana, Sukhino Bhavantu — and the concept of Vasudhaiva Kutumbakam (universal brotherhood), which are far higher and morally greater laudable goals for countries than materialistic concepts like GDP based on luxury for a few and mere pretence of a trickle down for the rest, a principle, which is patently unjust and inequitable.