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Home/upsc: economic planning/Page 3

Mains Answer Writing Latest Questions

Team
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TeamSupreme
Asked: August 22, 2024In:
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“Economic growth in the recent past has been led by increase in labour productivity.” Describe this assertion. Provide a growth trajectory that will increase employment without lowering labor productivity. (250 words) [UPSC 2022]

upsc: economic planning
  1. Asha Patil
    Asha Patil Begginer

    Economic Growth and Labour Productivity **1. Role of Labour Productivity in Economic Growth: Labour productivity refers to the output per unit of labour input. Recent economic growth has been significantly driven by improvements in labour productivity. For instance, India's IT sector has seen tremenRead more

    Economic Growth and Labour Productivity

    **1. Role of Labour Productivity in Economic Growth:

    • Labour productivity refers to the output per unit of labour input. Recent economic growth has been significantly driven by improvements in labour productivity. For instance, India’s IT sector has seen tremendous growth due to high productivity levels driven by technological advancements and skilled workforce. Enhanced automation and innovation in sectors such as manufacturing and services have led to higher output per worker, contributing to overall economic growth.

    **2. Recent Examples:

    • China’s Manufacturing Sector: China’s economic expansion has been fueled by significant productivity gains in manufacturing. The adoption of advanced technologies and efficient production methods has increased output, while the labor force has shifted from low-productivity jobs to higher-productivity roles.
    • India’s Digital Economy: In India, the digital economy’s growth, including sectors like e-commerce and fintech, has been powered by productivity improvements. For example, Paytm and Flipkart have leveraged technology to enhance efficiency, thus contributing to economic growth.

    Growth Pattern for Job Creation and Labour Productivity

    **1. Skill Development and Education:

    • Focus on enhancing education and skill development to align with market needs. By investing in vocational training and higher education, the workforce can transition to higher-productivity jobs while creating new employment opportunities. For example, Skill India programs aim to equip workers with skills relevant to emerging industries.

    **2. Support for Emerging Sectors:

    • Promote growth in emerging sectors like renewable energy, artificial intelligence, and green technologies. These sectors are likely to generate new job opportunities while driving productivity improvements. The National Hydrogen Mission in India aims to create jobs in the green energy sector while fostering innovation.

    **3. Entrepreneurship and Small Enterprises:

    • Encourage entrepreneurship and support small and medium-sized enterprises (SMEs). SMEs can drive job creation and boost productivity by fostering innovation and competition. Initiatives like the Startup India scheme provide support for new ventures that can lead to both job creation and productivity enhancements.

    **4. Infrastructure Development:

    • Invest in infrastructure projects that improve logistics and connectivity. Efficient infrastructure enhances productivity across various sectors and creates employment opportunities in construction and related industries. Projects such as the Bharatmala Pariyojana aim to improve road connectivity and spur economic activity.

    By focusing on skill development, supporting emerging sectors, fostering entrepreneurship, and investing in infrastructure, India can create more jobs while maintaining high labour productivity. This balanced approach ensures sustainable economic growth and equitable job distribution.

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Adheesh Raman
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Adheesh RamanLearner
Asked: January 7, 2025In:
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Roadmap for Answer Writing Introduction Briefly state the importance of industrial policies for economic growth and development in India since independence. Key Industrial Policies Overview Organize the discussion chronologically to highlight the evolution of policies. For each policy, include: Name of the Policy Year of Implementation Key Features ...

upsc: economic planning
  1. Team
    Best Answer
    Team Supreme

    Model Answer Since gaining independence in 1947, India has implemented a series of industrial policies aimed at fostering economic growth, creating employment, and enhancing competitiveness. Here’s a brief overview of these policies: Industrial Policy Resolution, 1948: This policy established IndiaRead more

    Model Answer

    Since gaining independence in 1947, India has implemented a series of industrial policies aimed at fostering economic growth, creating employment, and enhancing competitiveness. Here’s a brief overview of these policies:

    1. Industrial Policy Resolution, 1948: This policy established India as a mixed economy, categorizing industries into four groups:
      • Exclusive monopoly of the Central government (e.g., arms, atomic energy, railways).
      • Industries reserved for the state (e.g., coal, iron and steel).
      • Industries of basic importance regulated by the government.
      • Remaining industries open to private enterprises and cooperatives. Foreign investments were restricted under this policy.
    2. Industrial Policy Resolution, 1956: Known as the “Economic Constitution of India,” this policy emphasized expanding the public sector and preventing private monopolies. It classified industries into three sectors:
      • Schedule A: Public sector (17 industries).
      • Schedule B: Mixed sector (12 industries).
      • Schedule C: Private sector only. It also highlighted the importance of small-scale industries for employment and economic decentralization.
    3. Industrial Policy Statement, 1977: This policy focused on employment generation for the poor, reducing wealth concentration, and prioritizing small-scale industries. It imposed restrictions on multinational companies (MNCs).
    4. Industrial Policy Statement, 1980: This policy aimed to promote competition, modernization, and technological upgrades. It liberalized licensing and reaffirmed the Monopolies and Restrictive Trade Practices Act (MRTP) and the Foreign Exchange Regulation Act (FERA).
    5. New Industrial Policy, 1991: Marking a significant shift, this policy aimed at liberalization, privatization, and globalization. It increased the foreign direct investment (FDI) ceiling from 40% to 51% in selected sectors and allowed 100% FDI in certain areas like infrastructure. Industrial licensing was largely abolished, except for 18 industries, and the MRTP commission was established to regulate monopolistic practices.
    6. Recent Initiatives: The National Manufacturing Policy (2011) and the Make in India scheme (2014) were launched to further enhance manufacturing capabilities and attract investment. There is an ongoing discussion about the need for a new industrial policy to ensure inclusive and sustainable growth for the future.

    These policies reflect India’s evolving approach to industrialization, balancing state control with market forces to foster economic development.

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Meera Singh
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Meera SinghBegginer
Asked: July 20, 2024In:
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How does fiscal policy affect the functioning of an economy? Emphasize the government’s tools for reducing the fiscal deficit.

upsc: economic planning
  1. Naveena G
    Naveena G Begginer

    Fiscal policy plays a crucial role in managing an economy by influencing aggregate demand, economic growth, employment levels, and inflation. It involves the government's decisions regarding spending, taxation, and borrowing. Controlling the fiscal deficit (the difference between government expenditRead more

    Fiscal policy plays a crucial role in managing an economy by influencing aggregate demand, economic growth, employment levels, and inflation. It involves the government’s decisions regarding spending, taxation, and borrowing.
    Controlling the fiscal deficit (the difference between government expenditures and revenues) is crucial to maintain fiscal discipline and economic stability. Governments use several tools to manage their fiscal deficit:
    Government Spending: Governments can control the level and composition of spending. They may reduce spending in non-essential areas or increase spending in key sectors to stimulate growth.
    Taxation: Adjusting tax rates and structures can increase government revenue. Higher taxes can be implemented broadly or targeted at specific sectors or income groups.
    Borrowing: Governments can borrow funds to finance deficits. They issue bonds and other debt instruments to investors and institutions. Managing the amount and terms of borrowing is essential to avoid unsustainable debt levels.
    Public Sector Asset Sales: Selling state-owned assets can generate revenue and reduce the need for borrowing, although this approach is often controversial due to its long-term implications.
    Subsidy Reductions: Governments may reduce or eliminate subsidies on goods and services to cut expenditures and reduce fiscal deficits.
    Austerity Measures: These involve reducing government spending across the board, often including social programs and public sector wages. Austerity measures are contentious due to their potential negative impact on economic growth and social welfare.
    Public-Private Partnerships (PPPs): Engaging private sector participation in infrastructure projects can reduce the fiscal burden on governments while still achieving development goals.
    Effective fiscal policy management requires balancing these tools to achieve sustainable economic growth, manage inflation, and ensure public welfare. Political, social, and economic factors all influence how fiscal policy is crafted and implemented in any given economy.

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Suhasini Dutta
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Suhasini DuttaBegginer
Asked: August 22, 2024In:
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Roadmap for Answer Writing 1. Introduction Objective: Introduce the topic of GDP growth and inflation in the Indian economy. Key Point: State the importance of analyzing whether steady GDP growth and low inflation indicate a healthy economy. 2. Arguments Supporting the View A. Strong GDP ...

upsc: economic planning
  1. Team
    Team Supreme

    Model Answer Introduction The Indian economy has transitioned from high inflation to a more stable and lower inflation rate, coinciding with steady GDP growth over the past five years. This trend raises the question of whether these factors signify a healthy economy. Reasons Supporting the View 1. SRead more

    Model Answer

    Introduction

    The Indian economy has transitioned from high inflation to a more stable and lower inflation rate, coinciding with steady GDP growth over the past five years. This trend raises the question of whether these factors signify a healthy economy.

    Reasons Supporting the View

    1. Strong GDP Growth

    India has experienced an average GDP growth of around 7% per annum over the last decade, making it one of the fastest-growing economies globally. This growth has contributed to job creation and significant poverty reduction, indicating a robust economic environment.

    2. Low Inflation

    Low inflation rates foster economic stability, encouraging savings and investment. The Monetary Policy Committee (MPC) has effectively maintained price stability, ensuring that consumer purchasing power remains intact.

    3. Policy Stability

    Steady growth and low inflation create favorable market conditions for investment and production planning. This stability is crucial for enhancing business confidence and attracting foreign investments.

    Points Against the View

    1. Low Demand Indicators

    While low inflation can indicate stability, it may also reflect weak demand, adversely affecting industrial output. This disconnect can hinder overall economic health.

    2. Investment Reduction

    A contraction in consumption has limited further investment opportunities. Falling consumption patterns directly impact corporate revenues and investment decisions.

    3. High Unemployment

    Despite steady growth, unemployment rates have reached a 45-year high, indicating that growth has not translated into sufficient job creation.

    4. Double Balance Sheet Problem

    Many corporates face revenue shortages, complicating their ability to repay debts and contributing to rising Non-Performing Assets (NPAs) in the banking sector. This issue hampers economic growth potential.

    5. Unequal Growth Distribution

    The benefits of economic growth have not been evenly distributed, leaving significant portions of the population in poverty and widening the gap between the rich and poor.

    Conclusion

    While steady GDP growth and low inflation suggest a positive economic outlook for India, underlying issues such as low demand, high unemployment, and unequal growth distribution present significant challenges. A nuanced approach is necessary to ensure that growth translates into broader economic benefits for all citizens.

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Team
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TeamSupreme
Asked: September 12, 2024In:
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Answer the question in maximum 200 words. This question carries 11 marks. [MPPSC 2023] Talk about the financial side of state-federal ties while referencing the “One Nation, One Tax” policy.

upsc: economic planning
  1. Dr sangeeta Singh
    Dr sangeeta Singh Learner

    The financial aspect of Centre-State relations in India has undergone significant changes with the implementation of the Goods and Services Tax (GST), also known as the "One Nation One Tax" regime. *Pre-GST Scenario:* 1. Multiple taxes: Central sales tax, state VAT, excise duty, etc. 2. Complex taxRead more

    The financial aspect of Centre-State relations in India has undergone significant changes with the implementation of the Goods and Services Tax (GST), also known as the “One Nation One Tax” regime.

    *Pre-GST Scenario:*

    1. Multiple taxes: Central sales tax, state VAT, excise duty, etc.
    2. Complex tax structure: Different tax rates, exemptions, and compliance requirements.
    3. Revenue sharing: Centre and states shared taxes, with states receiving a significant portion.

    *GST Regime (Post-2017):*

    1. Unified tax: Single tax rate for goods and services across India.
    2. Dual GST: Central GST (CGST) and State GST (SGST) components.
    3. GST Council: Centre and states jointly decide tax rates, exemptions, and policies.

    *Financial Implications:*

    *Centre:*

    1. Reduced revenue: GST rates lower than pre-GST taxes.
    2. Compensation: Centre compensates states for revenue loss (5-year period).

    *States:*

    1. Increased autonomy: States have more control over taxation.
    2. Revenue growth: GST revenue growth benefits states.
    3. Dependence on Centre: States rely on Centre for compensation and GST Council decisions.

    *Challenges:*

    1. Revenue distribution: Disparities in revenue sharing between Centre and states.
    2. Tax rate disputes: Differences in GST rates between Centre and states.
    3. Compliance issues: Difficulty in implementing and enforcing GST.

    *Benefits:*

    1. Simplified tax structure
    2. Reduced tax evasion
    3. Increased transparency
    4. Boost to economic growth

    *Centre-State Relations:*

    1. Cooperative federalism: GST Council promotes collaboration.
    2. Increased dependence: States rely on Centre for revenue and policy decisions.
    3. Potential conflicts: Disagreements over revenue sharing, tax rates, and exemptions.

    *Reforms:*

    1. Improve GST compensation mechanism
    2. Enhance states’ autonomy in taxation
    3. Streamline compliance procedures
    4. Address revenue disparities

    *Conclusion:*

    The “One Nation One Tax” regime has transformed Centre-State financial relations in India. While challenges persist, the GST regime has simplified taxation, increased transparency, and boosted economic growth. Ongoing reforms aim to address revenue disparities, enhance state autonomy, and strengthen cooperative federalism.

     

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Team
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TeamSupreme
Asked: September 10, 2024In:
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Roadmap for Answer Writing 1. Introduction Context: Briefly introduce the Planning Commission’s establishment in 1950 and its replacement by NITI Aayog in 2015. Significance: Highlight the importance of understanding the differences in their principles to grasp India’s developmental strategy. 2. Key Differences in Principles A. ...

upsc: economic planning
  1. Team
    Team Supreme

    Model Answer Introduction India's Planning Commission was established in 1950, inspired by the Soviet model, to design five-year plans. In 2015, it was replaced by the National Institution for Transforming India (NITI) Aayog, reflecting the evolving needs of the nation. Key Differences in PrinciplesRead more

    Model Answer

    Introduction

    India’s Planning Commission was established in 1950, inspired by the Soviet model, to design five-year plans. In 2015, it was replaced by the National Institution for Transforming India (NITI) Aayog, reflecting the evolving needs of the nation.

    Key Differences in Principles

    1. Approach to Policy Formulation

    • NITI Aayog: Adopts a bottom-up approach, engaging various stakeholders and states in policy-making.
    • Planning Commission: Operated on a top-down approach, where decisions were made centrally and imposed on states.

    2. Ideological Basis

    • Planning Commission: Rooted in socialist ideals, which became less relevant post-Liberalization, Privatization, and Globalization (LPG) reforms.
    • NITI Aayog: Aims for competitive federalism in a free market economy, encouraging states to compete in development.

    3. Competitive Federalism

    • NITI Aayog: Implements online dashboards to rank states on various development indicators, facilitating the sharing of best practices.
      • Fact: Indicators include the Sustainable Development Goals (SDG) India Index and Health Index.
    • Planning Commission: Did not emphasize such competitive metrics.

    4. Decentralization and Participation

    • NITI Aayog: Promotes participatory decision-making with state involvement, enhancing cooperative federalism.
    • Planning Commission: Functioned as a centralized body, often led by union ministers or technocrats.

    5. Financial Powers

    • Planning Commission: Allocated funds directly to states.
    • NITI Aayog: Functions as an advisory body, lacking direct financial powers.

    6. Focus on Inclusive Growth

    • NITI Aayog: Prioritizes inclusive growth, addressing regional disparities and fostering balanced development.
    • Planning Commission: Aimed for similar goals but was often criticized for its top-down approach.

    7. Coordination Role

    • NITI Aayog: Enhances coordination among central and state governments, exemplified by initiatives like the 115 Aspirational Districts.
    • Planning Commission: Lacked this level of inter-ministerial and inter-governmental convergence.

    8. Relationship with Government

    • NITI Aayog: Acts as a think tank, maintaining intellectual distance from the government.
    • Planning Commission: Was closely tied to governmental operations.

    Conclusion

    While both NITI Aayog and the Planning Commission aim for socio-economic transformation, NITI Aayog’s approach is more modern, inclusive, and less bureaucratic, positioning it as a pivotal player in India’s development narrative.

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Reena Bhatt
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Reena BhattBegginer
Asked: August 22, 2024In:
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Roadmap for Answer Writing 1. Introduction Definition of Care Economy: Explain that it includes unpaid or underpaid work essential for societal well-being, often performed by women. Definition of Monetized Economy: Define it as the sector involving paid work that contributes to GDP. Key Statistic: ...

upsc: economic planning
  1. Team
    Best Answer
    Team Supreme

    Model Answer Introduction The care economy and the monetized economy represent two facets of economic activity. While the monetized economy includes paid work contributing to GDP, the care economy encompasses unpaid or underpaid tasks crucial for societal well-being, predominantly performed by womenRead more

    Model Answer

    Introduction

    The care economy and the monetized economy represent two facets of economic activity. While the monetized economy includes paid work contributing to GDP, the care economy encompasses unpaid or underpaid tasks crucial for societal well-being, predominantly performed by women. According to the International Labour Organization (ILO), unpaid care work accounts for 0.4% of GDP for men and 3.1% of GDP for women, emphasizing its economic significance.

    Differences Between Care Economy and Monetized Economy

    Aspect Care Economy Monetized Economy
    Nature of Work Involves unpaid tasks like childcare and eldercare. Focuses on paid goods and services exchanged for money.
    Recognition Often “invisible” in GDP statistics. Directly contributes to GDP and economic reports.
    Gender Participation Predominantly female-driven. More balanced gender distribution across sectors.
    Skill Level Requires emotional labor and multitasking, often unrecognized. Usually demands specialized skills and formal qualifications.
    Economic Value Largely unmonetized and overlooked. Clearly measured and easier to assess.
    Taxation Not subject to taxation. Income and profits are taxed, contributing to public finance.
    Regulation Lacks formal regulations and protections for caregivers. Governed by labor laws and safety standards.

    Bringing Care Economy into Monetized Economy Through Women Empowerment

    Strategies for Integration

    1. Blockchain-Verified Skill Credentials: Use blockchain to validate caregiving skills, enhancing credibility (Source: Accredible).
    2. Digital Platforms for Care Services: Expand platforms like Care.com to offer diverse care services, monetizing women’s caregiving roles.
    3. Social Protection Measures: Provide health insurance and maternity benefits to women in the care economy, ensuring financial security.
    4. Encouraging Entrepreneurship: Support women in starting care-related businesses, similar to the Lijjat Papad model.
    5. Access to Finance: Facilitate funding through Self-Help Groups (SHGs) to enable women to invest and expand their businesses.
    6. Social Impact Bonds: Implement bonds to fund community caregiving services, providing stable incomes to caregivers.
    7. Skill Training for All: Offer training to both women and men in caregiving, promoting shared responsibilities.
    8. Care Economy Co-operatives: Establish cooperatives to help caregivers negotiate better terms and incomes.
    9. AI-Enhanced Matching Platforms: Use AI for caregiver and recipient matching, improving service quality.
    10. Global Care Exchange Programs: Expand au pair programs to other care forms, enhancing income opportunities.

    Conclusion

    Integrating the care economy into the monetized economy through these strategies can empower women economically and socially. By recognizing and compensating caregiving roles, society can harness the full potential of women’s contributions, ensuring a more equitable economic landscape.

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Krishna Rao
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Krishna RaoLearner
Asked: July 25, 2024In:
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Examine the government’s initiatives to enhance the effectiveness and openness of the public investment management system, including the application of outcome-based monitoring, performance-based budgeting, and data-driven decision-making, and determine how they will affect the standard and impact of public spending.

upsc: economic planning
  1. Hansika Naidu
    Hansika Naidu Learner

    The Indian government has taken several steps to improve the efficiency and transparency of the public investment management system, with the aim of enhancing the quality and impact of public expenditure. Some of the key initiatives and their impact are as follows: Performance-Based Budgeting: The gRead more

    The Indian government has taken several steps to improve the efficiency and transparency of the public investment management system, with the aim of enhancing the quality and impact of public expenditure. Some of the key initiatives and their impact are as follows:

    1. Performance-Based Budgeting:
      • The government has introduced performance-based budgeting, which links budget allocation to the achievement of specific targets and outcomes.
      • This approach is intended to improve the accountability and effectiveness of public spending by aligning resource allocation with the desired development objectives.
      • Initiatives like the Outcome Budget and the Government e-Marketplace (GeM) platform have been implemented to facilitate this shift towards performance-based budgeting.
    2. Outcome-Based Monitoring:
      • The government has emphasized the need for outcome-based monitoring, which focuses on tracking the actual impact and results of public programs and schemes, rather than just the inputs or outputs.
      • This includes the use of key performance indicators (KPIs) and the regular monitoring and evaluation of program performance.
      • Initiatives like the NITI Aayog’s Development Monitoring and Evaluation Office (DMEO) have been established to strengthen the monitoring and evaluation framework.
    3. Data-Driven Decision-Making:
      • The government has made efforts to enhance the use of data and evidence in public investment decision-making processes.
      • This includes the development of data portals, such as the India Data Portal and the Open Government Data Platform, to improve the availability and accessibility of government data.
      • Initiatives like the Expenditure Management Commission have been tasked with recommending ways to improve the efficiency and transparency of public expenditure based on data-driven analysis.

    Impact on Improving Public Expenditure:

    1. Enhanced Accountability and Transparency:
      • The adoption of performance-based budgeting and outcome-based monitoring has increased the transparency and accountability of public spending, as the government is now required to justify resource allocation based on tangible results.
    2. Improved Efficiency and Rationalization of Expenditure:
      • The focus on data-driven decision-making and the linkage of budgets to performance outcomes have encouraged the government to identify and address inefficiencies, leading to the rationalization of public expenditure.
    3. Alignment with Development Priorities:
      • The shift towards outcome-based monitoring has helped align public investment with the government’s development priorities and ensure that resources are directed towards the most pressing needs.
    4. Challenges and Limitations:
      • While the government’s efforts are commendable, the implementation of these initiatives has faced some challenges, such as the availability and quality of data, capacity constraints within government agencies, and the need for a more comprehensive and integrated approach to public investment management.

    Overall, the government’s initiatives to improve the efficiency and transparency of the public investment management system have shown promising results, but sustained efforts are required to fully realize the potential of these reforms and ensure that public expenditure has a meaningful impact on the country’s development priorities.

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Prakher Singh
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Prakher SinghBegginer
Asked: July 23, 2024In:
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Analyze the government’s endeavors to synchronize India’s economic planning with the Sustainable Development Goals (SDGs) and the Paris Climate Agreement. Evaluate the obstacles and prospects associated with incorporating environmental and social factors into the nation’s development agenda.

upsc: economic planning
  1. Hansika Naidu
    Hansika Naidu Learner

    The Indian government has made efforts to align its economic planning with the Sustainable Development Goals (SDGs) and the Paris Agreement on climate change. However, integrating environmental and social considerations into the country's development priorities has presented both challenges and oppoRead more

    The Indian government has made efforts to align its economic planning with the Sustainable Development Goals (SDGs) and the Paris Agreement on climate change. However, integrating environmental and social considerations into the country’s development priorities has presented both challenges and opportunities.

    Aligning with the SDGs and Paris Agreement:

    • India has committed to achieving the SDGs by 2030 and has taken steps to align its national development plans, policies, and programs with the global agenda.
    • This includes the formulation of the National Indicator Framework to track progress on the SDGs and the establishment of the NITI Aayog (National Institution for Transforming India) to coordinate the implementation of the SDGs.
    • Regarding the Paris Agreement, India has set ambitious targets for reducing its greenhouse gas emissions and expanding its renewable energy capacity, demonstrating its commitment to climate action.

    Challenges in Integration:

    1. Balancing Economic Growth and Sustainability:
      • India’s continued focus on economic growth and development has sometimes led to tensions with environmental and social considerations.
      • Reconciling the demands of rapid industrialization, infrastructure development, and job creation with the need for sustainable and equitable growth remains a significant challenge.
    2. Institutional and Capacity Constraints:
      • Effectively integrating the SDGs and climate action into economic planning requires strong institutional frameworks, technical capabilities, and coordination across various government agencies and stakeholders.
      • Capacity limitations, siloed decision-making, and gaps in data and monitoring systems can hinder the integration process.
    3. Financing Sustainable Development:
      • Mobilizing the necessary financial resources to fund sustainable development initiatives, such as renewable energy projects, environmental protection measures, and social welfare programs, is a persistent challenge.
      • Striking the right balance between public and private investments, as well as accessing international climate finance, remains a key priority.

    Opportunities and Emerging Trends:

    1. Leveraging New Technologies:
      • The growth of digital technologies, renewable energy solutions, and innovative financing models can create new opportunities for sustainable development.
      • Harnessing these technological advancements can help address environmental challenges and promote inclusive growth.
    2. Enhancing Stakeholder Engagement:
      • Involving a diverse range of stakeholders, including the private sector, civil society, and local communities, in the planning and implementation of sustainable development initiatives can lead to more inclusive and responsive policies.
    3. Decentralized Approach and Subnational Action:
      • Some states and cities in India have taken the lead in integrating sustainability and climate action into their development plans, demonstrating the potential for a more decentralized and locally-driven approach.
      • Scaling up and replicating these subnational efforts can contribute to the overall progress on the SDGs and climate goals.

    To effectively integrate environmental and social considerations into India’s economic planning, a comprehensive and sustained approach is required. This may involve strengthening institutional mechanisms, improving data and monitoring systems, mobilizing innovative financing, and fostering multi-stakeholder collaboration. Balancing the imperatives of economic growth, environmental sustainability, and social equity will be crucial for India’s journey towards sustainable and inclusive development.

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Raudas Singh
  • 1
Raudas SinghBegginer
Asked: July 20, 2024In:
  • 1

Talk about the drawbacks of utilizing GDP to gauge a nation’s level of prosperity.

upsc: economic planning
  1. Mona Singh
    Mona Singh Begginer

    Gros Domestic Product (GDP) is the sum total of value of goods and services created within the geographical boundary of a country in a particular year. It is usually taken as an indicator of the well-being in the context of per capita income suggesting the prosperity of the people. It may indicate mRead more

    Gros Domestic Product (GDP) is the sum total of value of goods and services created within the geographical boundary of a country in a particular year. It is usually taken as an indicator of the well-being in the context of per capita income suggesting the prosperity of the people. It may indicate more income and capacity to buy more goods and services among the people. However, there are some limitations of using GDP as an indicator of economic welfare of a country:

    • Uneven Distribution of GDP: If the GDP of the country is rising, the economic well being may not rise as a consequence. This is because the rise in GDP may be concentrated in the hands of very few individuals or firms. For the rest, the income may in fact have fallen. In such cases, the welfare of the entire country cannot be reflected in per capita GDP.
    • Non-monetary exchanges or non-marketed activities: Many activities in an economy are not evaluated in monetary terms. For example, the domestic work that women perform at home is not paid for. Barter exchanges that take place in the informal sector are not registered as part of the economic activity. In developing countries, where many remote regions are underdeveloped, these kinds of barter exchanges are common occurrences, but they are generally not counted in the GDPs of these countries. Since these exchanges are not counted in the GDPs, there occurs underestimation of GDP. Hence, GDP calculated in the standard manner may not give us a clear indication of the productive activity and well-being of a country.
    • Externalities: Externalities refer to the benefits (or harms) a firm or an individual causes to another for which they are not paid (or penalized). Externalities do not have any market in which they can be bought and sold. For example, the output of a refinery is the amount of oil it refines. The value added of the refinery will be counted as part of the GDP of the economy. But in carrying out the production the refinery may also be polluting the nearby river. This may cause harm to the people who use the water of the river. Hence their well-being will fall. In this case, the GDP is not taking into account such negative externalities. Therefore, if we take GDP as a measure of welfare of the economy we shall be overestimating the actual well-being. There can be cases of positive externalities as well. In such cases, GDP will underestimate the actual well-being of the economy.

    In addition to this, GDP also does not take into account economic inequality, loss of jobs and opportunities and level of health and education and quality of choices in an economy. Therefore, new concepts like Gross National Happiness (GNH), Human Development Index (HDI) and the Social Progress Index (SPI) are often discussed as the better alternative to assess the well-being of society.

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On: April 18, 2025 Comments: 0

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