Rajan calls for relook at GDP methodology
Reserve Bank of India (RBI) governor Raghuram Rajan on Thursday revived the debate on the method of calculating gross domestic product (GDP), saying there are problems as it only talks about growth and leaves out a wider context.
“On the point about GDP, there are also problems with the way we count GDP… Sometimes we get growth when people move to a different area but we have to ensure that when people move, they do something that is value adding [to the economy]... We do lose some, we gain some and what is the net, let us be careful about how we count that,” Rajan said, while addressing students at the 13th convocation ceremony of the Indira Gandhi Institute of Development Research.
Rajan illustrated his point by saying that if two mothers were to take care of each other’s children and pay each other for that work, there would be some growth in GDP due to the sum of their earnings. However, this growth would not add anything to the economy.
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