Does the GDP capture well-being of the economy? Everything you need to know and alternatives to GDP.

The goal of economics is to promote well-being. Economic development cannot be considered the same as economic output, along with that people’s welfare should be considered. However, GDP was never intended to measure welfare or well-being. It only measures the objective data by measuring a country’s economic output which accounts for the total number of people. GDP has a lot of limitations, it does not account for household labour like gardening, child care, etc when they are unpaid. Volunteer work, which contributes to social well-being is unaccounted for. Similarly, the free services provided by NGO services which may be funded by donations are not accepted for either. Leisure is another factor that is neglected. Overworking may cause a person to feel tired and stressed, which holds them back from enjoying other activities. Unless they do spend money on leisure-related activities, it won’t reflect in GDP. Environmental degradation and resource depletion too are generally not accounted for GDP. Defensive expenditures turn up as positive contributions to GDP but undermine the associated ecological impacts. Money spent on medical facilities is accounted for, but it does not account if the life expectancy rate has risen or fallen. Two countries with the same GDP may have significantly different levels of well-being. It has nothing to say about inequality, though the GDP may have risen, it is possible that it is not the same for everyone in society. 

Alternative approaches have been provided to measure well-being and one such approach is The Genuine Progress Indicator (GPI) which takes into account the environmental and social aspects of an economy on overall well-being. It also includes the value of time spent on household and volunteer work and the value of higher education. Further, costs of crime and lost leisure time, and environmental degradation costs are subtracted. GPI estimates have also been developed for India. The GPI for India would yield a different result as compared to GDP. To achieve true economic development, it would become crucial for India to maintain and increase its GPI and not focus solely on GDP to maintain economic growth. 

Another approach is the Better Life Index (BLI) which functions on 11 topics that aim to capture the well-being of the country. The result for each topic is standardised across countries, which will help the country assess its economy. 

UN’s Human Development Index (HDI) is another alternative approach that is calculated on three components: life expectancy at birth, years of formal education, and real per-capita GDP. Countries with similar GDP levels may vary drastically in welfare as measured by HDI. It is relatively easier to apply this index in countries having less money to spend on data collection and is therefore valuable for developing countries. India featured on the 55-59.9 scale on the HDI along with Kenya and Bangladesh. The GDP of these countries are not the same, but the HDI places them at par with relations to general well-being. 

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at

In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories.

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