The Aakhya Weekly #66 | Embracing Human-Centric Development
The Aakhya Weekly #66 | Embracing Human-Centric Development
In Focus: GDP to Human Centric: A Progressive Policy Landscape
By Aradhana Gupta
The measurement of progress and prosperity in societies is a perennial topic of debate. Since the end of the second world war, Gross Domestic Product (GDP) has held its position as the primary yardstick for evaluating a nation's economic well-being. However, recent years have witnessed a growing acknowledgment that GDP, by itself, may not provide a comprehensive view of a society's overall welfare. This recognition has given rise to a human-centric approach, placing greater emphasis on the well-being and quality of life of individuals.
This idea has gained fresh momentum during the recently concluded G20 summit, where Prime Minister Narendra Modi advocated shifting away from a GDP-centric perspective to one firmly rooted in human well-being.
The GDP-Centric Approach
GDP is a measure of a nation's total economic output, arrived at by calculating the monetary value of all goods and services produced within its borders over a specified period. The GDP-centric approach focuses on economic growth as the primary means of improving living standards, extolling the virtues of increased production, consumption, and investment. It is popular for being a convenient and easily quantifiable metric, simplifying the task of policymakers in monitoring and comparing economic performance.
The adoption of GDP as the primary economic indicator traces its roots to the Bretton Wood System. Its processes were crafted during the Great Depression, when Governments clutched at straws to understand how bad the impact of the crisis had been. As a single measure of a country’s entire economic output - something that did not exist before - it gained widespread popularity in economist circles. Then, in 1944, as the second World War came to a close, the Bretton Woods Conference was tasked with international economic cooperation to rebuild a world torn asunder. Such cooperation was impossible without a reliable measure of economic output. And so, the conference solidified the preeminence of GDP. With decades of use since, GDP is now the key parameter used worldwide in assessing economic progress.
Every nation today aspires to boost its GDP, considering it a key component of its global standing and hard power. Achieving this goal involves increasing physical capital goods, advancing technology to boost output, and expanding the labor force and human capital. The higher GDP is, the “better” a country does in the goods and services it sells and the income it makes.
However, the GDP is not a perfect metric. One can have a high GDP and still be plagued with homelessness, starvation, and civil unrest. A focus on GDP-centric actions often leads to substantial gaps in addressing a nation's true aspirations. It fails to account for non-market activities like household work and volunteerism, which significantly contribute to societal well-being. It also overlooks income distribution and critical issues such as income inequality, poverty, and overall quality of life. According to the 2023 Oxfam Report, for instance, an astonishing 40% of the wealth generated in India between 2012 and 2021 flowed to a mere 1% of the population, while only 3% trickled down to the bottom 50%. Simultaneously, the National Family Health Survey-5, conducted by the Ministry of Health, reported a 36% stunting rate among children under 5 and a staggering 67% of them being anemic. All of this is when India is one of the largest economies in the globe based on its GDP.
GDP also disregards the environmental costs of unchecked economic growth, incentivising unsustainable practices that harm the planet. Recent ecological disasters in the Himalayas have rekindled debates on 'carrying capacity' and 'mindless development,' raising concerns about preserving pristine natural environments. Additionally, global warming, as documented by the IPCC report, has already pushed temperatures to a perilous 1.2 degrees Celsius increase. Disasters like wildfires and wildly unpredictable monsoons have become commonplace.
Thus, the Prime Minister’s call for a shift in the world's development paradigm, from GDP-centric to human-centric, carries an urgent message. Achieving this transformation entails measuring and enhancing various dimensions of human life.
The Human-Centric Approach
A human-centric approach to growth, in contrast, would prioritise the well-being, happiness, and quality of life of individuals in society. It would consider a broader range of factors beyond economic output, including education, healthcare, life expectancy, social equality, access to basic needs, and subjective measures of well-being and happiness.
This approach offers a more holistic perspective than GDP, examining multiple facets of human existence, beyond mere aggregate economic activity. It incentivises policies aimed at enhancing the overall well-being of citizens, rather than solely increasing their output. Also, by considering environmental and social factors, it promotes sustainable development practices.
Enhancing human capital in India involves upskilling its vast population and providing education to remote areas among other practices. The adoption of vernacular language education, as proposed in the New Education Policy, plays a crucial role. Moreover, it's not just about access to education but also access to the latest skills and educational advancements. Artificial intelligence, big data, and machine learning are the future of technology that India must harness in the current decade.
At the same time, ensuring the quality of life for its populace stands as the paramount objective for any nation-state. No sovereign entity can assert its position among the top five wealthiest nations and then falter in the provision of clean air, uncontaminated water, and robust healthcare for its citizens. Initiatives like the Swachh Bharat Abhiyan and ODF+ have ushered in significant advancements in terms of sanitation across India, with every village achieving Open Defecation Free (ODF) status, and a notable 70% progress toward total ODF+ status. Regrettably, similar achievements have not graced India's air quality. Four of its cities rank among the world's ten most polluted, a predicament that necessitates immediate attention.
A human-centric approach also entails good governance, people's participation as well as the voice of the Global South. In this regard, Prime Minister Modi’s push for greater inclusivity of the Global South in international decision-making brings us closer to this ideal.
However, it's worth noting that many elements of the human-centric approach, such as happiness and life satisfaction, are subjective and challenging to quantify accurately. It is, after all, its measurability that gave GDP such prominence. Collecting and analyzing data for multiple well-being indicators can also be complex and resource-intensive, posing a significant challenge for the adoption of human-centric metrics of development.
GDP - Human Crossroad: Policy Implications
Connected to the world, yet increasingly disassociated from and stratified within one’s local community and national society. Wealthier than ever, yet less secure. Politically conscious, yet disaffected and sceptical of government’s efficacy.
These contradictions are felt by many citizens in various economies across the globe. In polarized political environments, they struggle to make sense of the competing narratives advanced by their political and economic leaders, many of whom appear disconnected from the daily challenges they experience. Leaders are often perceived as agents of vested interests who are unable to grasp the significance of the disruptive forces at play in the economy or are unable to articulate a credible strategy for harnessing them for the good of society as a whole. This raises the need for pro human growth leaders at the global stage.
Economists have warned, since its introduction, that GDP is a specialized tool. Treating it as an indicator of general well-being is inaccurate and dangerous. However, over the last many years economic growth—measured by GDP—has been the sine qua non for economic progress. Per capita GDP is frequently used to compare quality of life in different countries. Governments often use changes in GDP as an indicator of the success of their economic and fiscal policies.
Shifting to a human-centric approach requires a substantial overhaul of policy frameworks, which may face resistance from those entrenched in the GDP-centric model. Policies focused on GDP growth often prioritize economic incentives, tax cuts, and deregulation to stimulate investment and consumption. Unfortunately, these policies can neglect income inequality, environmental sustainability, and societal well-being in pursuit of economic gains.
Conversely, policies aligned with the human-centric approach might aim to improve healthcare, education, and social safety nets. They may also consider the long-term consequences of economic activities on the environment and address income inequality. Many advocate for a balanced approach that combines GDP-centric and human-centric measures, recognizing the importance of economic growth while also prioritizing well-being, social equity, and sustainability.
Cultivating a Balanced Path…
The ongoing debate between GDP-centric and human-centric approaches represents a profound transformation in how societies assess progress and prosperity. While GDP remains a valuable tool for evaluating economic output, the human-centric approach challenges us to consider broader dimensions of well-being, encompassing health, education, happiness, and environmental sustainability.
A consensus has emerged around the globe in recent years on the need for a more socially inclusive economic growth and development model. But this consensus for a human centric approach to development is mainly directional; inclusive growth remains more an aspiration
than an action agenda.
Ultimately, a balanced synthesis of both perspectives may be the most effective path to enhancing the quality of life for all while safeguarding the planet's future. As this dialogue continues, it is poised to influence policy decisions in the years ahead as societies strive to strike a harmonious balance between economic growth and human well-being.
Top Stories of the Week
Digital recording of births and deaths from 1 Oct
Registration of Births and Deaths (Amendment) Act 2023, which comes into effect on October 1st, introduces provisions for digital registration and the delivery of birth and death certificates, establishing a nationwide database. This repository will be shared with other governmental authorities managing databases to enhance public service delivery, update information, and prevent errors in the national database.
Certificates issued under this act will serve as definitive age proofs, reducing the need for multiple documents to verify the date of birth or place. It enables the usage of digital birth certificates as a single document for admission to educational institutions, applications for driving licenses, government jobs, passports, Aadhaar, and marriage registration. This amendment streamlines access to these multiple services by eliminating the requirement for a variety of documents to prove one's age.
The rules will have to address right to privacy concerns over linking Aadhaar details of the parents and informants to the birth certificate. There are also dangers associated with erroneous entries, where individual details can be attached to any child born in the hospital. Additionally, the birth certificate has been made the conclusive proof of age going forward, which means that theoretically, in the absence of a birth certificate, an individual could potentially be denied access to fundamental rights such as education and voting. The efficiency of the registration process will determine whether or not these fears are unfounded.
Addressing supply challenges in India’s power sector
In an effort to enhance flexibility in India’s power exchange market, the Central Electricity Regulatory Commission (CERC), has permitted high-price bilateral trading on Power Exchange of India Limited (PXIL).
Traditionally, India relies on long-term power contracts, spanning 20-25 years, to fulfill its energy demand. Even in FY2022, these comprised 87% of its total power transactions. Long-term contracts provide revenue predictability and create the certainty required for investments in project development.
This trend is seeing a shift with the entry of solar power to the picture, however. Advancements in solar technology have reduced the cost of solar power. Solar power is intermittent – it fluctuates constantly, even over the course of a single day. Such power only allows for short term contracts. The possibility of securing such cheap power, therefore, has pushed distribution companies to consider short-term contracts.
54% of all short-term transactions happen over power exchanges. Power exchanges are wholesale markets for electricity, where entities make bids to purchase power for the short-term. The large number of buyers and sellers on these platforms make them competitive, allowing market forces to discover prices. However, a steep increase in prices this summer led to the imposition of a price cap of Rs.10 per unit on power traded on the exchange, to lower costs.
Unfortunately, power generated through gas or imported coal, or stored in batteries is costly. Producers relying on them are pushed out of the market by the price cap. Given the persistent high demand for electricity, the remaining supply infrastructure falls short of meeting the country’s power demand, making it necessary that these sources are brought back in. Consequently, the Ministry of Power has proposed a distinct segment for them, accompanied by an elevated price cap.
In line with this suggestion, PXIL has received CERC’s approval to introduce a high-price segment on its exchange platform. This segment allows a higher price cap - Rs. 20 per unit - for costlier power sources. Buyers who can afford to pay higher prices will benefit from this measure. Whether this goes beyond mere short-term relief, however, one is yet to see.
A Few Good Reads
Read Sergei Chernyshov’s first-hand account to understand why ordinary Russians overwhelmingly support the Russia-Ukraine war.
Despite loud proclamations of national pride, corporate India is not investing in the country. The reason for this is clear - they have no incentive to do so, writes Vivek Kaul.
China’s economic miracle was not the product of state guidance and Confucianism, but the victory of good old free markets, argues Yasheng Huang.
The Mint takes the view that India should distribute cash and not grains under its food programme.
In an interview with The Hindu, Rajeev Bhargava expounds on India’s relationship with religion. We must reimagine secularism, he claims - not merely as the protection of religious minorities, but also as protection of Hindus from their own orthodoxies.