Prof. Anish C. Aniyan
GDP is the market value of all the goods and products produced or provided within a country at a given moment in time. There are three ways to determine the GDP of a country. One is the production method, which measures the value added summed across all firms. Second, is the income method, which is the sum of labor income, capital income, and government income. Third, is the expenditure method, which is the sum of spending by customers, spending by businesses, spending by government, and net spending by foreign income. Although, GDP is very important indicator in economy, in my opinion, its increase does not indicate increase in welfare.
What a GDP can indicate is standard of living, which is different than quality of living or welfare. Standard of living is the amount of goods and services people can buy with the money they have. Quality of living or welfare is the general well-being of a society in terms of its political freedom, natural environment, education, healthcare, safety, amount of leisure and rewards that add to personal satisfaction. There are many issues why GDP does not indicate welfare.
The first issue is the inequality of wealth distribution, which is a comparison of the wealth of various members or groups in a society. GDP does not describe whether or not the people are truly benefitting from economic growth. This can be seen in countries such as Qatar. This is a sovereign Arab country located in Western Asia, occupying the small Qatar Peninsula on the northeastern coast of the Arabian Peninsula, which is considered to be a very wealth county. In this country an insignificant percentage of the population hold all the wealth of the country, but the wealth is significant due to oil trade. Due to the manners in which GDP can be calculated it does not show whether or not growth is actually improving the welfare of the people.
Second, Gross domestic