There has been euphoria over India’s economic growth accelerating to 6.1% in the March quarter, as it confirmed that the country remains one of the fastest growing emerging economies. Counterclaims followed in quick succession drawing attention to fall in private consumption, high inflation, rise in poverty, and income and wealth inequality. The rhetoric on either side has continued with growing intensity. What is missed in this debate, however, is that income is a narrow measure of well-being, as argued by Amartya Sen (1999), Angus Deaton (2008), and others. Although Sen and Deaton differ in their approach, they concur that we must look beyond income to measure well-being.
Life satisfaction and income
A close scrutiny of the relationship between life satisfaction and income based on Gallup World Poll (GWP) Surveys confirms a positive relationship between them with a slightly stronger effect in developed countries. But it is intriguing that growth of income has a negative effect on life satisfaction. It is plausible that there is a “threshold” income effect beyond which increases in income do not matter, or that there is no long-run relationship between the two. But this awaits empirical validation.
