Viswanathan K's Thoughts

When India’s GDP numbers were announced for the last quarter, the IMF said those numbers didn’t sound very accurate. Nithin Sasikumar wrote this excellent article on the concerns raised. He put two disclaimers right at the beginning. #1 : “Now I should point out that the IMF didn’t call us untrustworthy. They simply said that we can do better at how we calculate GDP.” And #2 , his post is not about the politics of GDP calculations.   Before going into the issues and concerns, he starts by explaining what GDP is, and why it is so important to calculate correctly. Simply put, you take all the economic activities in the country in a year (“sales from IPL tickets in Jaipur, biscuits being sold in Pune, setting up of a new factory in Chennai”) and sum up their values to get the GDP. It gives an idea of the overall state of the economy. It becomes one of the criteria for governments to frame policies, decide what to spend on, how much to increase taxes, and for the RBI to deci...

What is GDP (Gross Domestic Product) and why does it matter? Pranay Kotasthane tries to answer that in Missing in Action . Until the Great Depression in the US in the 1920’s and 30’s, governments didn’t bother about it. But the magnitude of the economic catastrophe forced governments to act. But without data, how could they know the right measures or the areas in which actions were needed?   Therefore, the US started to create mechanisms to keep track of the “health” of the overall economy. This need only increased during World War II as the US needed to balance spending on war expenses with domestic needs. Thus, by the end of World War II, the idea of GDP as the metric of economic status and its use in helping decide government actions – where/when to step in, which sectors were doing well or poorly – was widely accepted.   GDP has many failings. Growth in GDP doesn’t indicate “quality of growth” – was the growth because of war? Polluting industries? Eco-friendly acti...

A few years back, Chris Anderson wrote this book called Free , where he talked about how different models of free get their money back (advertisers, goodwill, charging for premium versions etc). But as James Surowiecki wrote , free has far more widespread ramifications. This has become particularly true in the Internet world we live in, where:  “Digital goods and services are everywhere you look, but their impact is hard to see in economic statistics… You may think that Wikipedia, Twitter, Snapchat, Google Maps, and so on are valuable. But, as far as G.D.P. is concerned, they barely exist.” This problem of assessing the economic value of free can no longer be pushed under the rug. As M.I.T. economist Erik Brynjolfsson says: “As digital goods make up a bigger share of economic activity, that means we’re likely getting a distorted picture of the economy as a whole.” It’s not just the economic value of the free stuff isn’t being added to our GDP calculations. At times,...