In our globalized world, each country strives to compete with the next to establish its own supremacy. But the days of armed military conflict have given way to the days of economic power struggle. In such a situation economists, econometrists and statisticians are constantly developing a variety of measures that deal with economic growth.
Though the GDP measures the gross increase or decrease in the total production of the country, it does not evaluate a vast number of criteria, which is necessary for actual economic development to take place.
Firstly the GDP ignores the size of the population in the country concerned. The GDP does not give us an insight into the average living standards of an individual and simply refers to a lump sum amount, which could have been generated solely by a few rich companies and individuals.
Not all goods and services produced in an economy are equally beneficial to society. The GDP makes no distinction about medicines and tobacco both of which have vastly different effects on the quality of life enjoyed by the people. Many products available to the rich in the market such as exquisite jewels or plush sports cars have no real utility in a developing country and are purchased mainly to maintain the status quo.
The calculation of the GDP also ignores the actual composition of the total production. The composition of the production of civilian and defense goods, capital and consumer goods, ‘regrettable necessities’ as proposed by Nancy Ruggles is not considered in the construction of the GDP.
Due to all these factors, the GDP is not considered a reliable quantity to measure a country’s level of development. However the concept of a GDP remains important due to the ease of collection of data for the same.