Why in news?

The government is reviving its 2021 plan to supplement GDP with a new metric, the Gross Domestic Knowledge Product (GDKP), to measure the impact of knowledge on economic and social life.

Recently, the Ministry of Statistics and Programme Implementation (MoSPI) held a session to discuss the conceptual framework.

GDKP would better reflect the contributions of innovation, intellectual assets, and knowledge-driven sectors to India’s economic growth.

What’s in today’s article?

• Gross Domestic Knowledge Product (GDKP)
• Capturing the impact of knowledge on economic and social life
• Challenges in Implementing GDKP
• Conclusion

About Gross Domestic Knowledge Product (GDKP)

• The GDKP is a proposed metric to supplement Gross Domestic Product (GDP) by capturing the contribution of knowledge-driven sectors, intellectual assets, and innovation to the economy.
• Unlike GDP, which primarily measures economic output through production and consumption, GDKP aims to assess the impact of knowledge on economic and social development.

Need for GDKP in India

• The government recognizes that in an era of rapid technological advancements and digital transformation, traditional economic indicators may not fully reflect the value generated by intellectual capital, research, and innovation.
• Capturing the Knowledge Economy
  • India is experiencing growth in research, patents, software development, AI, digital services, and intellectual property.
  • These knowledge-driven sectors significantly contribute to economic progress but are not fully accounted for in GDP measurements.
• Beyond Traditional Economic Indicators
  • GDP focuses on tangible goods and services but does not adequately reflect knowledge creation, education, and digital transformation.
  • A more holistic metric is required to understand how knowledge impacts economic and social well-being.
• Aligning with Global Trends
  • Many advanced economies are working on alternative indicators that measure intangible assets, digital innovation, and intellectual capital.
  • India aims to develop a framework that aligns with these international efforts.
• Policy and Investment Decisions
  • A well-defined GDKP could help the government formulate better policies for sectors like education, research, technology, and entrepreneurship.
  • It could guide investment in knowledge infrastructure, such as R&D, digital connectivity, and skill development.

Capturing the impact of knowledge on economic and social life

• Currently, Intellectual Property Products (IPP) are recorded under Gross Fixed Capital Formation (GFCF) in the GDP dataset.
  • GFCF is the total value of assets acquired for production purposes, minus the value of assets disposed of. It's also known as investment. 
• Satellite Account for Knowledge Economy
  • Currently, discussions are underway to explore the feasibility of a satellite account to measure the knowledge base of the economy.
  • MoSPI has prior experience with tourism, culture, ocean, and blue economy satellite accounts.
  • However, a framework for capturing the knowledge economy is lacking.
  • A technical committee will be formed to evaluate and guide the proposal.
• NITI Aayog’s GDKP Proposal
  • The GDKP was initially proposed in 2021 by NITI Aayog, but the National Statistical Commission found that it lacked a clear methodology for data collection and computation.
  • It noted the need for identification of knowledge parameters and adjustments to ensure accurate reflection of outcomes.
  • However, due to various complexities, after a review by NITI Aayog in August 2021, the project was shelved.

Challenges in Implementing GDKP

• Data Collection Issues
  • Unlike GDP, which relies on well-established economic indicators, GDKP requires new methodologies to measure knowledge output.
  • Data on intellectual property, research output, digital innovation, and human capital development is fragmented and difficult to quantify.
• Integration with GDP
  • Since some aspects of knowledge contribution are already captured in GDP (e.g., Intellectual Property under Gross Fixed Capital Formation), integrating GDKP with GDP without duplication is a challenge.
• Subjectivity in Measurement
  • The National Statistical Commission earlier noted that defining and quantifying knowledge parameters is highly subjective and requires extensive refinement.
  • MoSPI has acknowledged the need for a proper methodology to ensure accuracy and avoid perception-based estimations.

Conclusion

India’s move to explore GDKP reflects its ambition to shift from a production-based economic model to a knowledge-driven one.

While challenges exist in defining and measuring knowledge contributions, a well-structured GDKP could provide valuable insights for policymaking, investment, and long-term economic planning in an increasingly digital and innovation-led economy.