"The gross domestic product (GDP) is a fundamentally flawed system. It can be misleading about the real economic growth of the country. So one should not be overawed by the numbers," says India's leading economist Sanjeev Sanyal.
The Delhi-based young economist, environmentalist and founder of Sustainable Planet Institute (SPI), explains his reasons for questioning the importance given to GDP in calculating growth.
"The use of GDP to calculate economic progress is full of flaws. It looks at short-term growth, ignoring the long-term implications of the price it pays for such growth, " Sanyal told MAIL TODAY.
"It hardly takes into account issues like pollution and environment and does not tell whether or not the growth is sustainable in the long run," he added.
Sanyal quit his job as chief economist of Deutsche Bank to work on evolving his own method of calculating growth, which also takes into account pollution, environment-related issues and other sociological indicators of sustainable growth.
The new accounting system has been recognised by the European Union (EU) for calculating growth. It has established him as a 'young global leader' at the World Economic Forum this year.
"If we take the example of Uttar Pradesh, the state may claim high economic growth in terms of industrialisation. But if we just take into account the water pollution level that the state is facing, it will drag down the state's GDP by 17 per cent," Sanyal adds.
The new accounting system takes into account the negatives of growth. A state adds to its GDP if it has preserved or revived its resources through curbing pollution and maintaining ecological balance.
Sanyal also questions India's urbanisation model, calling it faulty.
"We always go to the extremes when we talk about urbanisation. Either we focus on just a few mega cities or we talk about protecting villages. But we completely ignore many small cities, which can emerge as the engine of new growth," he says.
"Today most of the metros are overcrowded. People migrate from villages to metros, skipping the smaller cities, as there is no infrastructure development. We need to develop cities like Allahabad and Aligarh, which will balance the migration and economic growth," Sanyal adds.
He says, the whole process of urbanisation needs to be overhauled, as it is using the parameters as old as thirty years.
Another point he makes is about the wrong image being propagated of the urban slums.
"The perception that Indian slums are places of hopelessness and must be removed is wrong. I look at slums as routers of economic growth. One cannot claim to make India slum-free without giving the migrants an alternative habitat. We need to plan slums rather than making the country slum- free," he adds.
Courtesy: Mail Today