Gauging GDP: Rethinking How We Measure Economic Growth

Rethinking GDP: How to Measure Economic Growth in a Changing World

By Sesh Kumar Pulipaka

New Delhi, April 16, 2025: When Hotmail co-founder Sabeer Bhatia recently questioned how India calculates its Gross Domestic Product (GDP), he did more than spark controversy — he ripped the lid off a simmering crisis of credibility. In a sharp critique published by Business Today (April 2025), Bhatia offered a piercing observation: in India, if you transfer ₹1,000 to someone and they send it right back, the system counts both transactions, plus GST, as GDP.

No work was done, no value created, yet the nation’s GDP swells by ₹2,000. Is that growth, or just a well-dressed illusion?

Counting Circles or Real Output?

India’s GDP includes GST revenues as part of value-added calculations. So even when there’s no tangible work done, say, money is transferred in a service that’s digital or circular, it counts toward GDP.

This practice, while technically correct under global norms, can distort the perception of genuine economic progress in a country where a vast informal sector and patchy tax compliance make it hard to distinguish substance from shadow.

Can India Afford Not to Change?

India’s current GDP architecture is built on sectoral data — some based on physical output, others on enterprise surveys or tax filings. It has made technical improvements over time: incorporating the MCA-21 corporate database, shifting base years, and modernizing methods.

Yet, it remains tilted toward transaction tracking and tax visibility rather than genuine economic engagement.

Productivity, Participation, and the People Left Behind

India’s GDP grew rapidly in the last two decades, yet labour force participation has remained stubbornly low. According to the Periodic Labour Force Survey, only 41.7 per cent of Indian women aged 15 and above were in the labour force in 2023–24, a sharp rise from earlier years but still far below global norms.

Beyond the Numbers: The Institutional Challenge

Changing how India reports GDP is not just a matter of better data. It’s about reforming the culture and coordination of economic measurement.

The National Statistical Office already compiles labour force and productivity data, but often in isolation from GDP estimation.

What’s at Stake?

GDP is not just a number. It shapes fiscal policies, investor sentiment, credit ratings, and electoral narratives. A distorted GDP picture — one inflated by transactional churning or missing key labour data — can mislead decision-makers and the public alike.

A Wake-Up Call, Not a Rejection

Sabeer Bhatia’s intervention may seem provocative, but it is less a denunciation than a demand for evolution. His call to recalibrate GDP around effort rather than monetary velocity is a reminder that numbers, if not grounded in reality, can mislead.

(This is an opinion piece, views expressed solely belong to the author)

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About The Author

pseshkumar

Sesh Kumar Pulipaka is a retired officer of the Indian Audit and Accounts Service (IA&AS), having served under the Comptroller and Auditor General of India. He has authored two books on CAG– ‘CAG- ENSURING ACCOUNTABILITY AMIDST CONTROVERSIES- an inside view’ and ‘CAG- WHAT IT OUGHT TO BE AUDITING’ in addition to a third book ‘The Sacred Sound Path- walking with Nada Brahma and my Guru’.
His career was marked by significant contributions to public sector auditing, reflecting his expertise in financial oversight and governance. As a 1982-batch IA&AS officer, he held various roles within the CAG’s framework, focusing on ensuring accountability in government financial operations.

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