Use of GDP to Measure Economic Health
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What is GDP?
- According to the IMF (International Monetary Fund): “GDP measures the monetary value of final goods and services—that is, those that are bought by the final user—produced in a country in a given period of time (say a quarter or a year)”.
- It is the primary yardstick used by the multilateral agencies, the RBI and other analysts to measure the health of an economy.
Why is GDP not a perfect measure of economic health?
There are 3 main reasons why GDP is a questionable measure of economic health:- The real GDP growth rate is contaminated by ‘double deflation problem’.
- In the new GDP series, introduced in 2015, the deflator problem was made more critical by the shift from the volume
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