If you see GDP growing at a fast rate, it is not a matter of celebration; it might actually be a warning. Don’t do that. Slow down. GDP is something that you can increase even with a lot of income inequality, as is happening in the case of countries like India. We need clarity. We need to be extremely clear on the definitions of our national imperatives. If development means the images we have been carrying of the United States, that is unsustainable, just not possible.
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Questioner: My name is Ansul. My question is about consumption versus development. On one side, we are talking about decreasing consumption to tackle climate change, but on the other side we are talking about building India into a developed nation. So what is the middle path to decrease consumption plus create this country a developed nation?
Acharya Prashant: A very important question, because what we are doing is, we are taking development as synonymous with GDP growth. Whereas this is Economics 101 that development is a very wide index that incorporates the true welfare of the human being. GDP growth, which is an aggregate measure in the case of India, is an aggregation over 50 crore people.
That GDP number, first of all, as we said, is aggregate, so it hides a lot of things in terms of income inequality. Secondly, it is only a very small part of the overall aspect of development. Thirdly, even per capita GDP plateaus when it comes to its impact on human welfare beyond a point. Which means that there is a definite relationship between income levels and welfare. At the lower end of incomes, you increase income, you find welfare increasing correspondingly, but as incomes increase the marginal utility of income in terms of adding to your welfare reduces, and at a point it just flattens.
