GDP, ECONOMIC GROWTH & MESS Modern Capitalist Economy is like a train fitted with our Manufacturing sector as its engine taking the society towards enhanced living standards. GDP in a way a speedometer of this train to be watched by us – the Society to see whether our train is being driven fast by the engine or not. Convetionally as we studied in Economics the two engines mainly- mfg & Agro were the barometers to GDP or GNP but of late the Service sector is also treated as part of measuring the GDP. I feel it is mainly because USA is losing its strong hold on the leadership of giant Manufacturing leader as China, Japan & Korea have grown in leaps & bounds. So naturally in India also now service sector is getting all the more prominence. As per latest stats the position as World leaders is – 1. USA World’s largest single National economy – US$ 16.62 trillion- almost 25% of global GDP(global GDP $85 trillion)!. Its purchasing power at GDP level is almost 20% of global purchasing power!. It is single largest Consumer of Natural resources but surprisingly agriculture takes only 2% of its GDP. This shows its mammoth reliance on manufacturing & service oriented contribution in its GDP share. While we get surprised at its tall figures one important missing link is its highest consumption of natural resources which is the main contributory to its GDP/GNP. 2. China Today China has outpaced USA overshadowing Japan- the one time success story listening to & reading that, we have grown up. It is world’s fastet growing economy & has beaten USA in manufacturing sector by leaps & bounds. It is not a small achievement by any standards.Consistently it has maintained double digit GDP @ 10% over last 30 years. Any body with a normal IQ can understand what it amounts as 10% has to be maintained continuously on increased levels. 2012 its GDP was US$ 8.36 trillion. China is single largest exporter of manufacturing goods in the world & second largest as importer. It has outpaced its rival the world leader USA in manufacturing sector to second place pushing USA now as a leader in Service sectoronly. China leads world in farm out put but yet its agri contribution to GDP is only 14%. 3. European Union Over all GDP in 2012 US$ 16.86 trillion. Had EU been a single nation probably it would have single largest economy in the World. All this indicate that more the production more will be GDP. However more production amounts to more consumption of our planets natural resources!. Wealth is measured at surplus of natural resources produced over consumed. Meaning more we consume more we produce & the speedometer will show more GDP! Modern technology helps in greater way to enhance GDP by making fast changes. We are witnessing mobile phones laptops palmtops (for ex) with more memory power in the level of 30 GB/100Gb/5TB etc which no one actually requires. This false enhancement is only aimed at increasing sales by hooking the consumer that with high RAM memory his computer would run faster. This concept of faster growth is made to apply in every sector only aimed at higher production leading to higher growth! for trading the Planet for mere paper money! Modern day Debt economy The basic principle what we learn in finance is never do business with own money but always do it on borrowed money ! This is the first lesson of doing business. If this theory is applied to many major economies we understand the concept of Global debt. As a principle the deficit financing is always been an indicator of faster economic growth – at least we were taught in our Financial learnings & India has always been following deficit financing. Year after year the Indian Finance Minister churns out Deficit Budgets aiming at increased growth rate ! In short today most of countries follow debt financing meaning a negative growth which contributes to higher GDP! No doubt it is confusing but is a stark reality ! This means we are consuming our own natural resources faster than anytime in the past. A debt driven economy at times leads to consuming others natural resources keeping its own resources intact like draining out Petroleum from Middle East while Western giants keeping their reserves intact! Best example is Indian iron ore is exported to Japan- Japan processes it & sells back to India for higher value! This lure for paper money has made illegal mining in India a prosperous trade! Natural resources on this Planet are finite & limited. With faster growth we are fast draining out these resources from Planet for the sake of paper money. So higher the GDP faster is the depletion rate of Natural resources- Naturally higher GDP growth is not an issue we need to be very much proud of! (Ref - Chartered Accountant Issue)
Posted on: Mon, 07 Oct 2013 18:36:55 +0000
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