What Exactly is the GDP?
Before starting to get to know about importance of the GDP, understand the GDP itself. GDP is a gross domestic product which is consider as the total market value of the all the goods and services produced in the country for a definitive period of time.
It served as a indicator which proves that the country is growing. See, when business are produces more products and services, people are consuming and spending more, so the economy is growing. The higher GDP from previous year conclude that the country overall growth is happening.
So, Overall objectives and importance of GDP is further explain in detail…
Higher GDP is equal to Higher Job Opportunity
When the GDP number is high, it means the consumers are more and they are demanding the goods and services from the businessess. So, simply the market is growing, so business expand their reach to increase the business.
To expand a business, they need more people as to generate employement and provide good salaries also. Alternatively, when the GDP goes down then the people consumes, buy less and it lead to decrease business income and employement opportunity.
It is a measure of standard of living of common people
When the GDP of country increases, it tend to increase the GDP per capita person. It means the average income per person will be increased. It simply means people have more money in their pocket and they can spend more on education, healthcare and on their standard of living.
On a global scale, it is used to understand the growth of country and the growth of the peoples.
GDP contributes Nation growth through tax collection
Each time someone buys or sells something, he or she will pay tax. So, the government is collecting tax from them. When economy is growing the tax system is also growing and Government will get more money without a single rupees of increase in tax rate.
The money will further spent on, of course on public infrastructures like highways, public transport, clean energy, social services subsidies like healthcare, schools and public safety measures.
When the GDP decreases, the governement faces budget issues and deficits funds so the government is not able to develop the society as it should be.
Increase GDP helps to attract the Investment from Developed countries
Multinational companies looks for the places where the market is increasing and demand are high. So, when the GDP increases it signals the investors to invest their money and get a good returns. So, they open factories, offices and products in that nation. It increases the job employement and earning capacity of the person.
A countrys steady and growing GDP attract Foreign Direct Investment (FDI) which further brings more capital, innovative technology and high paying jobs.
Limitations of GDP
If we look at the positive side of the GDP, we must acknowledge and understand what GDP is not telling us right. High GDP also have some side effects when it is misbalanced in the country.
- Income inequality in the people – A rising GDP simply means the capita per person increases, but that sometimes becomes true. If the wealth is distributed unevenly then large section of society get missed, as the GDP per capita person may not applied to lower section of the society.
- Environmental Cost – Sudden rise in the industrial production can damage the pollution and resources depletion.
- Quality of life – GDP measure success and money growth, however it does not define the mental health, leisure time and overall human happiness.
Conclusion
GDP is growth is important, however it should be adjusted to the inflation and then real GDP numbers come. GDP should not go down for sure, but always a higher GDP does not mean that every section of the society is uplifted. But, it too increase the foreign investment and businesses in India. So, measuring the Pros and cons in GDP is important to develop the country.
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