Is GDP still the best development yardstick?
When a country announces that its economy has grown faster than expected, the number is usually treated as good news. A higher growth rate appears in headlines, political spheres, and economic reports as evidence that the country is moving forward, but an often-overlooked question remains: does a growing economy necessarily mean people are living better lives? Gross Domestic Product (GDP) is probably the most familiar measure of economic performance. It shows the monetary value of goods and services produced within an economy and helps indicate whether economic activity is expanding or slowing down. For governments, businesses and economists, this information is extremely important.
But GDP was never designed to answer a much bigger question: how well are people actually doing?
This is where the understanding of development needs to change. GDP should not be discarded; it remains an essential measure of economic activity. However, treating it as the best measure of development gives an incomplete picture of progress. Consider two countries with similar GDP per capita. One may have good schools, accessible healthcare, clean surroundings and relatively equal opportunities. The other may have high inequality, poor public services and limited employment opportunities for a large section of its population. If only GDP is considered, these differences can easily disappear behind an average number.
This is one of the biggest weaknesses of GDP: it measures output, but not how the benefits of that output are shared. A country can become richer while many of its citizens continue to struggle with unemployment, poor healthcare or inadequate education. GDP per capita can rise even when income and wealth are increasingly concentrated. An average can therefore reveal something important about an economy without revealing enough about the people living in it.
GDP also leaves out activities that matter enormously to everyday life. Unpaid care work within the household, for example, contributes to people’s well-being but does not receive the same recognition in national accounts as market transactions. Similarly, GDP does not indicate whether people have enough leisure time, whether they feel secure in their jobs, or whether economic growth is improving their quality of life.
The environmental cost of growth presents another problem. Economic activity that increases production today may sometimes create costs that appear only later. Pollution, environmental degradation and depletion of natural resources can accompany economic expansion, yet GDP alone does not provide a complete account of these losses. The question is therefore not simply whether an economy is growing, but whether that growth can be sustained without reducing the opportunities available to future generations.
The Organisation for Economic Co-operation and Development (OECD) has increasingly argued for looking “beyond GDP” for precisely this reason. Its work on measuring well-being emphasises that economic progress should also be considered in terms of health, education, jobs, work-life balance, social connections, inequality and environmental sustainability.
The debate is particularly relevant for India. India has experienced substantial economic expansion and set ambitious goals to become a major global economy, but a country’s development cannot be understood through economic output alone. It is also worth asking whether people have access to quality education and healthcare, whether young people can find productive employment, whether women have equal economic opportunities, and whether income gains are reaching different sections of society.
The Human Development Index (HDI) offers one way to view this broader picture. Instead of focusing only on economic output, HDI combines indicators of health, education and income. According to the United Nations Development Programme’s (UNDP) 2025 Human Development Report, India’s HDI increased from 0.676 in 2022 to 0.685 in 2023, moving the country from rank 133 to 130 among 193 countries. Life expectancy also reached 72 years in 2023. At the same time, the UNDP notes that inequality reduces India’s HDI by 30.7%.
India’s human development trajectory
Analysing economic output alongside health, education, and income indicators from the 2025 UNDP Human Development Report.
These figures reveal something GDP alone cannot. Economic growth can contribute to better human development, but the relationship is not automatic. Growth has to be converted into opportunities, capabilities and improvements in people’s everyday life.
This does not mean GDP has become irrelevant; in fact, economic growth is necessary for development because it can create jobs, raise incomes, expand the government’s tax base, and provide resources for investment in infrastructure, education, and healthcare. For developing economies, ignoring growth would be just as problematic as treating growth as the only goal. The real issue, then, is not GDP versus development. It is GDP as one part of development.
The Stiglitz-Sen-Fitoussi Commission, whose work strongly influenced the international debate on measuring progress beyond GDP, similarly argued that economic performance and social progress should be assessed through a broader range of indicators. The focus should move beyond averages and consider inequality, well-being and sustainability.
For policymakers, this means viewing a country’s progress through a wider dashboard. GDP growth should be considered alongside employment, poverty, inequality, health, education, environmental sustainability and other measures of well-being. None of these indicators is perfect on its own, but together they can provide a much more realistic picture.
Ultimately, development should be about improving people’s ability to live secure, healthy and meaningful lives. Economic growth is an important means of achieving that goal, but it should not become the goal itself. Perhaps, then, the question is not whether GDP is still useful. It clearly is. The more important question is whether policymakers are willing to look beyond a single number when measuring progress. If development is about people, measures of development should reflect people too.
