Growth and GDP: what the headline number hides

Gross domestic product, GDP, is the total market value of all final goods and services produced within a country in a year. Real GDP adjusts for inflation, so its growth rate is meant to show whether the economy produced more, not merely whether prices rose. India measures GDP at market prices and also reports gross value added, GVA, which is GDP minus indirect taxes plus subsidies, and which is the basis for the sector shares used in most analysis. The base year for the current series is 2011-12, meaning real growth is measured against prices of that year.

The headline growth figure is useful but limited. Real GDP grew by 8.2 per cent in 2023-24, according to the Economic Survey 2023-24, a strong performance by world standards. But GDP counts market production, not well-being: it does not subtract pollution or resource depletion, it values unpaid household work at zero, and it says nothing about who gains. A year of fast GDP growth can coincide with stagnant wages, falling farm incomes or rising inequality, which is why civil studies answers should pair GDP with employment, poverty and distribution data.

Per capita GDP is a better rough guide to average living standards, since it divides output by population, but it is still an average: it hides the gap between a software engineer in Bengaluru and a landless labourer in Bihar. International comparisons add another layer. At market exchange rates India is among the world's largest economies; at purchasing power parity, which adjusts for cheaper prices in India, its rank is higher still. Both measures are estimates, revised as methods improve, and rankings move with exchange rates as well as with real production.

GDP statistics in India have also been contested. The large informal sector is hard to measure, surveys are infrequent, and revisions can be large. The lesson is not to ignore GDP — it remains the best single summary of economic activity — but to treat it as one indicator among several, and to ask, for any growth claim, whose incomes grew, in which sectors, and in which states.