Alternative to GDP

Topic There is rising criticism of the widespread use of gross domestic product as an index finger of the health of an delivery. In fact, some experts argon of the opinion that gross domestic product growth is making the society poorer. critic everyy analyse this opinion in view of the concept of sustainability and also discuss some alternate measures macrocosm suggested and their implications to the businesses? gross domestic product as an scotch measure of the economic progress of a country Gross municipal product (gross domestic product) is considered one of the most important factors that determine the economic activity and hence the progress of the reading of a country.It is the pecuniary value of totally the final goods and services produced by a country in a specified time. Therefore, it is considered that if the countrys economic production increases, other factors remaining positive, then it positively benefits all the citizens of the country. It is hence apply as an index finger for the countrys standard of living1. Therefore, greater the gross domestic product, give away the health of an economy and hence better the lives of the citizens.Reasons for criticism on the use of gross domestic product as an power of economic progress As GDP measures the monetary value of the final goods and services produced, it means that the capital spent on the countrys welfare for example, millions spent on manufacturing fancy electronic gadgets, constructing a prison, cutting forests to use wood for production of further goods are all considered at par spell measuring the GDP. There is no emphasis on the quality of the output, the progress of the country in basis of the social state of affairs, merciful happiness, etc.As these are essential ingredients in determining the health of an economy, the concept of using GDP as a measuring scale of the economic progress of a country if criticised. Disadvantages of GDP GDP is criticised on many aspects it ob scures growing inequality, aids depletion of resources and one of the most liberal criticisms is that it measures expending on education at par with expenditure on cigarettes i. e. it does non differentiate whether the expending that aids the GDP percentage is going towards a positive or negative cause. GDP does not measures the economic services that nature provides for example, prevention of floods and landslides by hold upence of dense forests it does not account for health, pick environment, etc. i. e. GDP falls short in taking into account equally important things that exist to make a country liveable by fostering social cohesion, along with just the monetary value of goods and services * GDP takes into account the government spending, but from where the funding is sourced and where it is utilized is not taken into account.Hence, government borrowing is considered good for a country as far as GDP numeration is concerned * Money transactions that take place unofficial ly and go unrecorded are not accounted for in the calculation of GDP. Hence it does not help in avoiding taxes or prevention of illegal transactions and spending of such huge amount goes unnoticed * Harmful side effects like, pollution is not accounted for in the GDP.No deductions are made from GDP for their harmful effects but addition to GDP is made by market transactions that aid in removing these harmful effects. Hence the calculation of GDP is not balanced * The GDP takes into account the goods and services produced but not exchanged for money. For example, volunteer tame or growing own food and consuming it is not included in the GDP whereas expenditure on buying food from the market is taken into account 2.Adverse effects of using GDP as a sole measure for economic success As GDP takes into account plainly some value created in the country and does not take into account some(prenominal) key transactions, GDP often increases at the expense of real growth and progress. The r esult is that GDP fails miserably as an index of economic success on the sustainability scale. The environmental and social aspects are not covered by the GDP. option measures & their business implications There are several alternating(a) indicators of the progress of a country.These measure economic activity, environmental or social activities, well-being or changes in environmental, social or human capital. * Genuine pass Indicator (GPI) It provides a complete picture of economical and social progress. There are several indicators apply to calculate GPI that are broadly classified under three categories economic, environmental and social. The economic category indicators are similar to gross product measurement. The environment factors measure speak to of pollution, cost of change to natural resources, cost of climate change, etc.The social indicator includes the value of education, lost leisure time, cost of crime, etc. This indicator has been adopted by the state of Maryl and and is altered to include the impact of income inequality on the economy of the state. This indicator indicated the need to focus on reducing the level of income inequality in order to change Marylands overall economic and social growth. Hence, this indicator has been successfully implemented that includes all the factors of well-being in a society.This leads to modified business practices in order to reduce inequality and improve economic, environmental and social spheres of the state * Human Development Index (HDI) It is used by the UNDP to show how the improvement in economic growth and human development is improving conditions of the human in the various countries. The HDI is defined as process of widening choices available to humans in order to live an educated, long and healthy brio and to have access to resources to have a healthy and justly standard of living.It makes use of political freedom, human rights and self-respect to measure the index but as they are difficul t to measure, the index uses longevity, knowledgeable and decent standards of livings as indicators in lieu of prosperous and long lives. * Gross National Happiness (GNH) It is frequently used as an alternative measure of progress. It was originally suggested by Bhutan to be used instead of using GDP as an appropriate measure of progress. It measures quality of life or social progress in harmony with Bhutans culture and spiritual values rather than focusing more on economic activity.It measures seven types of wellness economic, environmental, physical, mental, workplace, social and political. Several conferences have also been held on use of GNH and it was primarily used to metrical unit the progress of the country on reflections of the countrys Buddhist origins3(Coztanza, Hart, Posner & Talberth, 2009). Conclusion There are several alternative measures that are suggested to be used to measure the progress and the social well-being of a country.GDP is flawed such that it aids de trimental activities and does not take into account the positive activities of a country. Hence, an alternative that measures not only the market value of final goods and service but which also takes into account the social, economic and environmental factors while calculating the progress of a country is imperative to lead to sustainable development. The rate of flow use of GDP leads to more consumption of harmful cigarettes with no emphasis on the environmental humiliation from the industrial and business rocesses. Hence, although the economy is progressing in certain spheres of economic activity, it is indeed lagging on sustainable development which requires pollution control, reduced resource usage, better social and income equality. Therefore, alternate measures that take into account all the factors that impact a nation should be developed and the alternative measure that is a composite of all the factors should be used to ensure sustainable development of the economy that r eflects progress in daily lives of its citizens.References1. http//www.investopedia.com/ footing/g/gdp.asp 2. http//zorach.wordpress.com/2010/08/27/why-gdp-gross-domestic-product-is-a-poor-measure-of-wealth-and-prosperity/ 3. (Coztanza, Hart, Posner & Talberth, 2009) http//www.bu.edu/pardee/files/documents/PP-004-GDP.pdf