GDP Impacts the Common Man

The estimated value of goods and services produced in a particular time frame within the borders of a nation is called the Gross Domestic Product (GDP). GDP affects the per capita income, which is the average income of an individual or a country in a year. The high or poor rate of GDP not only affects the economy of the country, but it also affects every individual who comes within the circle of the economy of a country, i.e., the common man, businessman, etc. A recession resulting from low GDP growth affects an individual’s earning capacity by decreasing their earnings, among other adverse changes. When the GDP goes down or goes negative, fear of recession arises, leading to higher unemployment rates, a decline in business revenue, and lower spending capacity of consumers. Therefore, a steadily growing GDP is vital for the country’s economy and the common person’s economic health.

GDP and its impact on the economy

GDP is the monetary value of the sum of all the final goods and services produced in a country in an accounting year. Therefore, a high GDP indicates overall progress made by citizens.

In India, during the earlier years that followed independence, the government adopted a trickle-down policy to manage the country’s economy. The government thought this would be good for the overall economy and the development of the backward classes. 

Unfortunately, the policy failed to help the economy and raise the standard of living for the citizens. Several poverty alleviation programmes were implemented to help the financially backward classes. Faster and more inclusive growth was the motto of the 11th and 12th Five Year plans. 

The primary sector, which is the private job sector of the country containing large industries and startups, is the largest sector known to offer employment to half of the country’s population. Consistent workers move from agriculture to the industrial and other urban sectors due to the bad terms of agriculture with other industries.  

Because of this, low agricultural growth resulted in poor capita generation, low amount of investment, and thereby low income. Public as well as private investments are on a decline. 

A downward growth rate also affects the industrial and service sector and the workforce. When a company faces a slowdown, low income per capita forces them to adopt cost-cutting measures that impact the employees. 

On the other hand, companies tend to invest more money into infrastructure and business expansion when the business is booming. This opens employment opportunities through backward and forward linkages and generates demand in other related sectors. Different aspects of an industry get affected differently due to changes in GDP.

Other than these industries, public revenue falls due to specific fallouts. A fall in growth rate can further cause a fall in public investment, adversely affecting critical public services. To cut the difference between revenue and expenditure, the government may look up to a fiscal deficit, leading the interest rates to go up, negatively affecting the investment. Moreover, higher fiscal deficits are also inflationary.

Conclusion

GDP is the monetary value of the sum of all the final goods and services produced in a country in an accounting year. Therefore, a high GDP indicates overall progress made by the country’s people. 

Growth in GDP is essential not only for a country’s economy, but also for the economic health of the commoner, directly or indirectly. GDP affects the per capita income, which is the average income of an individual or a country in a year.

Even if the growth rate is 6%, we should not fail to distribute the growth among all sectors. Other factors like health, welfare, and equality, which are development factors, are also important. However, these factors will fail to stand up to the desired outcome without growth.