The health of economy is often gauged by the GDP and IIP figures in India. In the light of recent economic growth trend in India, examine how GDP and IIP data reflect the health of economy. (150 Words)
GDP indicates the aggregate value added on products. While IIP is a composite short-term indicator of change of volume of production with 75 % weightage of manufacturing.
Both helps in measuring economic health of a nation but GDP measures value addition while IIP indicates real production growth.
The recent higher growth in GDP (5.4%) in comparison to IIP (2%) indicates there is more value addition to the product than actual increase in the volume of production. This increases profit of businessmen.
But, both IIP and GDP have demerits like they don’t measure the quality of development like distribution of wealth. There is no measure of environmental harm calculation, no long term welfare measures etc.
Thus there is a need to switch to other indexes like Human Development Index (having education, life expectancy, etc.), Index of Sustainable Economic Welfare, Gross Happiness Index etc.