The whirlpool of India’s GDP
Everybody is crying out about an impending slowdown. Headlines like those of the GDP growth plummeting, the stock market nose-diving, nobody buying cars any more, and so many thousands losing their jobs, are appearing everywhere. When an economy registers negative GDP growth for two or more consecutive quarters, it could be termed as a recession. The three sectors crying out the loudest – finance, real estate and automobile – their growth can’t continue forever. The sky can’t be clear all 365 days!
Whose growth does the GDP indicate? If it is only certain sectors of the economy, crying wolf is no good. The wolf has already been here. It was silently feasting upon smallholder farmers and daily wage earners, when people were buying high-rise flats and cars, using EMIs. The loan default at Infrastructure Leasing & Financial Services Limited (IL&FS) last year was the trailer of the liquidity crunch film that is now hitting screens.
Most of the GDP rise has come from consumer goods. Consumption growth has been aided and abetted by the rise in personal lending. How much you earn is no more the question people ask. How much you spend is what they are interested in. Money has lost much of its meaning as a means to buy services and products with credit flowing in the veins of the economy. Money itself has become a commodity in the era of financialism.
Unlike in capitalism where money is used as capital to produce goods and services; in financialism, money is used to grow more money. Credit has penetrated every aspect of human life – from childbirth, schooling, and housing to holidaying, wining-dinning, and getting beauty treatments using credit cards. Living beyond one’s means has become the culture. So what happens when your salary that pays for the EMIs and credit card dues gets hit, or is lost altogether? Reality bites, it is biting now.
Young people mistakenly thought that their higher pay packages, coming out of a larger GDP and the rising Sensex, were correlated with a higher quality of life and more happiness. High packages brought with them their own lifestyle trappings. A large number of the young people are now finding that this was true only up to a certain income level, after that the large income is indeed a trap of lifetime slavery to the creditors. Beyond a certain income level, additional increases in income do not bring higher quality of life.
Young French President Nicolas Sarkozy (b. 1955) in 2009 commissioned a panel led by Nobel laureate economist Joseph Stiglitz (b. 1943) to examine the issue of recession as he found “a dangerous gulf of incomprehension between experts sure of their knowledge and citizens whose experience of life is completely out of sync with the story told by the data.” India is very different. Our leaders are know-all types and our experts can derive multiple conclusions on the same set of data.
The inventor of GDP, Nobel laureate economist Simon Kuznets (1901-1985) was uneasy about a measure that treated all production equally. He wanted to subtract, rather than add, things he considered detrimental to human well-being, such as arms, financial speculation and advertising. But GDP as it is now calculated makes no distinction between the tariff of a hotel room or a hospital bed, the price of a bottle of whiskey or milk, and charity or gambling. The more the business, of whatever type, is seen as good.
Robert Kennedy (1925–1968) famously took pity on GDP politics, saying, “It counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.”
The New India should not get trapped in the GDP game played by a few for the benefit of a few. For long, tax payers’ money was used to create wealth for a few – let some of them be sobered down. Many people abandoned their small towns and parents there to metro cities and opted for unsustainable lifestyles – let those be moderated. If the stock market falls, the nation will not fall with it. Three-fourth of the Indian people are living at a level from where only rise is possible. The crash of some peaks, and the bursting of some bubbles, as GDP declines will not cause an earthquake.
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