At the very beginning itself, Simon Kuznets, widely accepted as the creator of GDP, cautioned the world by stating, “the welfare of a nation can scarcely be inferred from a GDP” (Kuznet 1934). Regardless, GDP is regularly referred by leading economists, politicians, top-level decision makers, and the media as though it represents overall progress or welfare. For example, a report released by the World Bank says that nothing besides long-term high rates of GDP growth can solve the world’s poverty problem (Commission on Growth and Development, 2008). Politicians love nothing more than to boast about the “booms” and “expansions” that GDP registers on their watch. They all promise "rapid" or "double-digit" yearly increases in the GDP, as if that is an unquestionably desirable thing. GDP rankings of countries are taken as primary scorecard of nation’s economic health and well-being. The greater the GDP, and especially the faster it grows, the better a country is said to be doing. No wonder, economic policies for more than a half century have typically concentrated on increasing GDP only. But now, it is being realized that GDP is a flawed measure of welfare. It is simply a tally of all monetary exchanges that take place in a given year. As such, it does not differentiate between economic activities that add to our well‐being and ones that undermine our quality of life. In this way, needless expenditures triggered by crime, accidents, toxic waste contamination, preventable natural disasters, prisons and corporate fraud count the same as socially productive investments in housing, education, healthcare, sanitation, or mass transportation. Many attempts have been made to redefine progress, and replace GDP with new indicators of progress and welfare. In the international community, perhaps the biggest nudge has come from French President Nicolas Sarkozy, who commissioned a report by marquee-name economists, including Nobel laureates Joseph Stiglitz and Amartya Sen, to find alternatives to what he calls "GDP fetishism". One of the most advanced and commonly discussed indicators among these alternatives is GPI. It is designed to take fuller account of the health of a nation's economy by incorporating environmental and social factors which are not measured by GDP. It attempts to shift prevailing definition of progress from economic growth to people's sense of quality of their lives. The GPI assigns value to the life-sustaining functions of households, communities and the natural environment so that the destruction of these and their replacement with commercialized substitutes, no longer appears as growth and gain. This seminar deals with the limitations of GDP as a measure of welfare and gives a brief overview of GPI. Important studies related to calculation of GPI for various parts of the world are also presented.

1. GPI
SURPASSING GDP AS A MEASURE OF
WELFARE
PRESENTED BY
GUNJAN BHANDARI
MAJOR ADVISOR
Dr. B.V. CHINNAPPA REDDY

2. OUTLINE
 GDP and welfare
 GDP boosters and diminishers
 GPI : Overview
 Formula of GPI
 Components of GPI
 Applications of GPI
 Conclusion
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3. GDP DEBATE
TAKES VIOLENT
TURN, AS BOTH
PARTIES FIGHT
OVER IT
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4. 4
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5. WHAT IS GDP?
GDP = GROSS + DOMESTIC + PRODUCT
“Gross Domestic Product is the market value of all
final goods and services produced within a
geographical entity within a given period of time.”
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6. WELFARE/ WELL BEING/
DEVELOPMENT/
PROGRESS
 Etymology : Old English wel faran "condition of being or
doing well.”
 Availability of resources and presence of conditions
required
for
reasonably
comfortable,
healthy,
and secure living.
 Comprises our physical, mental, spiritual health, the
social cohesion of our households and communities,
and the integrity of the natural environment.
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7. BOOSTERS AND
DIMINISHERS
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8. THE
STABILIZER
CASE
8
THE
LAWYERS
CASE
THE
GANGES
CASE
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9. 3/3/2014
Source: Deutsche Bank Research, 2007
Fig. 1: Elements of happiness and well-being.
Not everything that counts can be counted, and not everything that can be counted counts.
(Albert Einstein)
9

10. If the GDP doesn’t
count them, does
the GDP counts??
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11. THEN WHAT
NEXT????
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12. BALANCE BETWEEN…
ECONOMIC
ENVIRONMENTAL
SOCIAL
GPI
12
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13. .
13
Source: Kubiszewski et al., 2013
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Fig. 6: Trends in global GPI/ capita and global GDP/capita

14. GPI : OVERVIEW
 Genuine Progress Indicator
 Quantity and quality.
 Comprehensive indicator.
 Proposed in 1989 by Daly and Cobb in their book
“For the Common Good.”
 Renamed by „Redefining Progress‟in1995.
 NGO‟s and academic interest.
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15. FORMULA OF GPI
GPI+ W – D+ G + W -–N – S – E - N
= Cadj – S – E D
Where Cadj = personal consumption expenditures
adjusted for income inequality,
G = non-defensive government expenditures,
W = non-monetarized contributions to welfare,
D = defensive private expenditures,
S = social cost
E = costs of environmental degradation, and
N = depreciation of natural capital base.
15
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16. Table 1: Components of the .Genuine Progress Indicator
ECONOMIC
• Personal consumption
expenditures (+).
• Income inequality (+/-).
• Adjusted personal
consumption.
• Services of consumer
durables (+).
• Cost of consumer durables ().
• Cost of underemployment (-).
• Net capital investment (+/-).
• Cost of water pollution (-).
• Value of house work (+).
• Cost of air pollution (-).
• Cost of family changes (-)
• Cost of noise pollution (-).
• Cost of crime (-).
• Cost of net wetlands change
(-).
• Cost of personal pollution
abatement (-)
• Cost of net farmland change
(-).
• Value of volunteer work (+).
• Cost of net forest cover
change (-).
• Cost of climate change (-).
• Cost of ozone depletion(-).
• Cost of nonrenewable
energy source depletion (-).
16
SOCIAL
ENVIRONMENTAL
• Cost of lost leisure time (-)
• Value of higher education
(+).
• Services of highways and
streets (+).
• Cost of commuting (-).
• Cost of motor vehicle
crashes (-).
Source:http://www.green.maryland.gov/mdgpi/indicators.asp
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17. IMPORTANT
STUDIES
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18. STUDY-I
WORLD
SCENARIO
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19. Table 2: Studies of the GPI at the national scale listed by country.
Sl. No. Country
Study
Study period
1
Hamilton, 1997
1950-1996
Hamilton, 1999
1950-1996
Hamilton and Denniss, 2000
1950-2000
Lawn 2008
1967-2006
Australia
2
Austria
Stockhammer et al., 1997
1955-1992
3
Belgium
Bleys, 2006
1970-2000
Bleys, 2008
1970-2004
4
Castaneda, 1999
1965-1995
5
China
Wen et al., 2008
1970-2005
6
Czech Republic
Scasny, 2002
7
France
Nourry, 2008
1990-2002
8
Germany
Diefenbacher, 1994
1950-1990
9
India
Lawn, 2008
1987-2003
10
19
Chile
Italy
Guenno and Tiezzi, 1998
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1960-1991

20. Sl. No. Country
Study
Study period
11
Makino et al., 2003
1955-2000
Makino, 2008
1970-2003
Rosenberg and Oegema, 1995
1950-1992
Bleys, 2007
1971-2004
Forgie et al. 2008
1970-2005
Forgie et al. 2007
1970-2005
12
13
Japan
Netherlands
New Zealand
14
Poland
Gil and Slezynski, 2003
1980-1997
15
Scotland
Moffatt and Wilson, 1994
1980-1991
Hanley et al. 1999
1980-1993
Jackson and Stymne, 1996
1970-2005
Jackson and Stymne, 1996
1950-1992
16
Sweden
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20

21. Source: Posner, 2010.
Sl. No.
Country
Study
Study period
17
Thailand
Clarke and Islam, 2004
1975-1999
Clarke and Shaw, 2008
1975-2004
Jackson and Marks, 1994
1950-1990
Jackson, 2004
1950-2002
Anielski and Rowe, 1999
1950-1997
Venetoulis and Cobb, 2004
1950-2002
Talberth et al. 2007
1950-2004
18
19
UK
US
20
Vietnam
Hong et al. 2008
1992-2004
21
Wales
Midmore et al. 2000
1970-1996
Matthews et al. 2003
1990-2000
Jones et al. 2007
1990-2005
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Source: Posner, 2010.

22. 8
9
10
11
12
20
15
16
17
18
19
13
14
2
1
12 France
13 Netherland
14 Italy
15 Poland
16 Germany
17 Czech Republic
18 Belgium
19 Austria
21
20 USA
21 Chile
22
5 4
1 India
2 China
3 Japan
4 Vietnam
5 Thailand
6 Australia
7 New Zealand
3 8 Sweden
9 Scotland
10 UK
11 Wales
6
Fig. 3: Countries for which GPI study has been done.
7
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Source: Presenter.

23. 23
Source: Kubiszewski et al., 2013.
Fig. 4: Trends in GDP/capita for 17 countries.
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24. 24
Source: Kubiszewski et al., 2013
Fig. 5: Trends in GPI/capita for 17 countries.
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25. Source: Kubiszewski et al., 2013
Fig. 6: Trends in global GPI/ capita and global GDP/capita.
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26. Source: Kubiszewski et al., 2013
Fig. 7: A plot of global GDP/capita versus estimated global GPI/capita.
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27. Source: Kubiszewski et al., 2013
Fig. 8: Comparison of trends in Japanese GDP/capita and GPI/capita.
Indexed to 1990 = 100
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28. STUDY II
THE STORY OF
MARYLAND
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29. The story begins…..
 Chesapeake Bay : largest and most productive
29
estuarine systems in the world.
 Value: Between $360 million and $1.8 billion (2001).
 Maryland‟s fisheries : $1 billion to the state‟s
economy, sustained around 4,000 jobs, and
generated more than $22 million for government
coffers. (2005)
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30.  Constant threat from population growth, land
conversion, and short-term economic pursuits.
 State of the Bay Report,2010: functioning at 31 percent
of its historical potential.
 University of Maryland gave the Bay : Grade C- 2010.
 2004 : Bay‟s cleanup cost at $28 billion.
 MDNRE : 2011 budgets ,around $575 million.
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31. GPI GAINED MOMENTUM…
 Proper welfare indicator.
 Composite index.
 Familiar terms and issues.
 Data available, recognized, and accepted.
 Easily convey the core elements of sustainability.
 Link between past and future.
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32. PLANNING...
 State and Center for Integrated Environmental
Research (CIER) at the University of Maryland,
College Park.
 Working group : State agencies such as business
and economic development, natural resources,
and crime prevention.
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33. EXECUTION…
 Calculated the MD-GPI from 1960 to 2010.
 Model from 2010 to 2060.
 Evidence of the validity of Maryland‟s GPI results:
Close fit.
February 2010, the MD-GPI was publicly
unveiled accompanied by web based
interactive tool.
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34. RESULTS…
Source: http://www.green.maryland.gov/mdgpi/indicators.asp
Fig. 9: Trends in GDP and GPI of the State of Maryland
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35. Fig. 10: Web- based interactive tool launched by the State of Maryland.
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36. USING THE INDICATOR...
 Inducing parallel policy efforts in pursuing a more




36
restorative, healthy economy.
Planning and land-use decisions.
Promoting private ventures in environmental
restoration.
Assess and rank proposed funding projects.
State purchasing the land.
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37. HOPES…
 GPI outpace the GSP around 2025.
 By 2060, the difference between the two metrics
will be in billions of dollars.
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38. STUDY- III
GLIMPSE OF INDIA
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39. GENUINE PROGRESS
IN INDIA
Lawn,2008 : 17 years (1987-2003)
b. 5 parameters:
 Weighted consumption expenditure.
 Services by infrastructural capital.
 Value of unpaid labor.
 Social cost.
 Value of lost natural capital services.
a.
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40. STUDY LIMITATIONS
 Value of volunteer labor was excluded.
 Cost of underemployment was excluded.
 Cost of family breakdown was overlooked.
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41. 9000
8000
BILLION RUPEES (1993)
7000
6000
WCE
5000
SIC
UL
4000
SC
NCD
3000
2000
1000
0
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
YEARS
41
Fig. 11: Trends in major components of GPI of India.
Source: Presenter.
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42. 16000
14000
12000
RUPEES (1993)
10000
8000
GPI pc
GDP pc
6000
4000
2000
0
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
YEARS
42
Fig. 12: Trends in GPI/capita and GDP/capita of India.
Source: Presenter.
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43. 9000
8000
7000
6000
GPI/capita
5000
GPI pc vs GDP pc
4000
3000
2000
1000
0
0
2000
4000
6000
8000
10000
12000
14000
16000
GDP/capita
Fig. 12: A plot of GPI/capita versus GDP/capita of India. All data
are in 1993 rupees.
Source: Presenter.
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44. IMPLICATIONS
 Approaching threshold level.
 Higher GPI : Lower population,
better quality output and better equity.
 Maintaining
moderate
GPI
:
Population
stabilization,
increase
resource
use
efficiency, limit natural capital depletion & ensure
equitable distribution of its growth in economic
output among its citizens.
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45. CONCLUSION
 Economic growth has become desirable by definition.
 GDP has become the de facto universal metric for




45
'standards of living'.
Time to go beyond GDP.
GPI provides an alternative to GDP.
Alternative measures needs to be supported by
media, international organizations and policy makers.
India also needs to quicken its pace and move
forward in the way of sustainability.
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46. 46
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47. THANKS
The day will come when nations will be judged not by their military or
economic strength, nor by the splendour of their capital cities and public
buildings, but by the well-being of their people: by their levels of
health, nutrition and education; by their opportunities to earn a fair
reward for their labours; by their ability to participate in the decisions
that affect their lives; by the respect that is shown for their civil and
political liberties; by the provision that is made for those who are
vulnerable and disadvantaged; and by the protection that is afforded to
the growing minds and bodies of their children.
(United Nations Children’s Fund (UNICEF), The Progress of Nations, 1998)
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