Rethinking Development: Agenda for a Political Economy Perspective

For most of the twentieth century, the progress of nations was measured by a single number: GDP. A country that grew its economy was considered to be developing; one that didn’t was deemed to be failing. But this framing left out the majority of what actually makes life livable – access to food, clean water, healthcare, education, and the ability to participate meaningfully in society. The political economy of development, as a field, exists precisely to challenge this narrow view. It argues that development is not just an economic event – it is a deeply political one, shaped by power, institutions, history, and human values. Rethinking development through this lens means asking different questions, measuring different outcomes, and building different kinds of policies.

Why development theory needed a reset 🔗

Post-World War II development thinking was dominated by the idea that economic growth automatically leads to improved living standards – that a rising tide lifts all boats. Classical models, from Walt Rostow’s “stages of growth” to structuralist frameworks, broadly assumed that countries would converge toward Western industrial prosperity if they followed the right economic prescriptions. These included capital accumulation, industrialization, export-led growth, and in the 1980s and 1990s, the neoliberal recipe of market liberalization and privatization.

The problem is that this didn’t always translate into better lives. India’s own trajectory is instructive. India witnessed impressive GDP growth over the decades following liberalization, yet this growth was accompanied by widening inequality and persistent failure to lift citizens out of poverty and undernutrition. The benefits were concentrated, geographically and socially. Rural communities, Scheduled Castes, Scheduled Tribes, women, and informal workers were largely left on the margins of the growth story.

This is precisely the gap the political economy of development seeks to address. Questions of political economy have moved to the centre of development studies over the last two decades, with growing recognition that politics and institutional structures shape policy choices and ultimately economic outcomes. Development is not a neutral or automatic process – it is produced by decisions made within specific power structures, and those decisions reflect whose interests are prioritized.

The limits of GDP as a development metric 🔗

GDP measures the total value of goods and services produced within an economy. What it does not measure is who benefits, who is excluded, or whether growth is environmentally or socially sustainable. Economists have long recognized that GDP is an imperfect measure of overall economic well-being – it does not account for the production of pollution, the health of the population, or the distribution of income.

The consequences of relying exclusively on GDP are well-documented. Policy-making focused on GDP has historically diverted attention from sustainable well-being for all. Rapid industrialization, for instance, may inflate GDP while simultaneously degrading agricultural land, displacing communities, and eroding ecological systems. Environmental destruction is invisible in GDP calculations. So is unpaid labor, which predominantly falls on women. So is growing income inequality – a country can post strong GDP figures while the bottom half of its population falls further behind.

Beyond this, many traditional economic indicators do not properly reflect the real story behind well-being. Factors such as life expectancy at birth, level of education, empowerment of vulnerable groups, quality of employment, and the quantity of free time all provide a more complete picture of personal development in a society – none of which are captured by GDP alone.

Toward a humanistic development agenda 🔗

The most significant intellectual challenge to the GDP-centric model came from Nobel laureate Amartya Sen’s capability approach. Rather than asking how much a country produces, Sen asked what people are actually able to do and be – their real freedoms and functionalities. Deprivation of capabilities can be understood as poverty, which is not limited to low income, but is influenced by a wide range of factors including living environment, education, and mental and physical health.

This thinking directly inspired the Human Development Index (HDI), the first comprehensive framework for measuring social progress that is independent of GDP. Introduced by the UNDP in 1990, the HDI evaluates development across three dimensions: health (measured by life expectancy), education (measured by mean years of schooling), and standard of living (measured by gross national income per capita). Its core message was clear: development must be assessed through a human lens, not merely an economic one.

Since then, the alternatives to GDP have proliferated. Major international organizations have developed Beyond-GDP alternatives: the OECD’s Better Life Index, the World Bank’s Comprehensive Wealth metric, UNEP’s Inclusive Wealth Index, and the UN’s Sustainable Development Goals. At the national level, Bhutan’s Gross National Happiness Index, New Zealand’s Living Standards Framework, and Scotland’s National Performance Framework have demonstrated that it is entirely possible to institutionalize a well-being-oriented approach to governance.

The Social Progress Index 🔗

The Social Progress Index is built around three dimensions: basic human needs (nutrition, water, shelter, and safety), foundations of well-being (knowledge, information, health, and sustainability), and opportunity (personal rights, freedom, tolerance, and advanced education). It deliberately excludes economic indicators, allowing analysts to examine how much social progress a country achieves relative to its level of GDP – and whether the two move together at all.

The Genuine Progress Indicator 🔗

The Genuine Progress Indicator (GPI) measures a country’s well-being by taking into account economic, environmental, and social factors together. Unlike GDP, GPI subtracts the costs of inequality, pollution, crime, and loss of leisure time, while adding the value of volunteer work and household services. It offers a fundamentally different picture of whether growth is actually making people better off.

Social equity and empowerment as development priorities 🔗

A humanistic development agenda cannot remain purely at the level of measurement. It must translate into policy. At the core of the political economy of development is the argument that structural inequalities – the systemic barriers that prevent certain groups from accessing opportunities – must be directly addressed through policy intervention, not left to trickle-down effects.

In India, these structural inequalities are layered and historically deep. Caste, gender, region, and class all intersect to determine who has access to land, credit, education, and political voice. The Indian government has implemented affirmative action policies including reservations for Scheduled Castes, Scheduled Tribes, and Other Backward Classes in educational institutions, government jobs, and political representation, aiming to address historical marginalization and create a more inclusive society.

The shift toward a rights-based approach in the mid-2000s marked a significant evolution in India’s development policy. Programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the Right to Education Act were introduced to directly address social inclusion, moving from charity-based welfare to legally enforceable entitlements. This matters enormously because rights-based frameworks shift the relationship between the state and the citizen – from beneficiary to rights-holder.

UNICEF recognizes that accountable and participatory local governance is vital to delivering practical, inclusive, and efficient social services – a principle that aligns with the broader political economy argument for community participation in development. Development that is designed and implemented without the involvement of those it aims to serve tends to replicate the very exclusions it is meant to correct.

Sustainability: the third pillar of the new development agenda 🔗

Alongside equity and empowerment, sustainability has emerged as a non-negotiable dimension of the new development agenda. There is increasing recognition that policymakers should go beyond GDP and broaden their focus to metrics that reflect the well-being of current and future generations. This is not only an ecological argument – it is a political economy argument. Unsustainable development concentrates short-term gains among elites while displacing long-term costs onto communities with the least power to resist them.

Sustainable development – understood as development that balances environmental protection, social equity, and economic viability – demands that development strategies account for natural resource depletion, climate vulnerability, and intergenerational justice. For a country like India, where millions of the rural poor depend directly on ecosystems for their livelihoods, environmental degradation is not a side issue. It is a development crisis.

What a new development policy agenda looks like 🔗

Drawing together the strands above, a political economy approach to development calls for a fundamental reorientation of policy priorities. Achieving inclusive growth in India requires continued investment in human capital, expanding infrastructure in rural areas, strengthening social security, creating employment opportunities, and empowering communities through participation in local governance.

This agenda has several concrete implications. First, development metrics must be broadened. Policymakers cannot manage what they do not measure, and if GDP remains the primary metric, it will continue to drive decisions that maximize output at the expense of equity and well-being. Second, social protection must be understood not as charity but as infrastructure – social safety nets can free individuals from existing and potential deprivations and therefore broaden the scope of poverty reduction. Third, communities – especially marginalized ones – must be active participants in designing the development programs that affect them, not passive recipients.

Critically, institutions matter for growth and development. The new political economy of development insists that good governance, accountable institutions, and inclusive political structures are not optional add-ons to economic policy – they are its foundation. Where institutional structures are extractive or captured by narrow elites, development policies will consistently fail to reach those who need them most.

The unfinished agenda 🔗

The political economy of development does not offer a simple formula. It offers a more honest way of asking the question. Development is not just about expanding output – it is about expanding human freedom, reducing structural inequality, ensuring ecological sustainability, and building institutions that are genuinely accountable to the people they serve. The GDP-centric model provided a convenient simplification. The political economy agenda asks us to accept the complexity, and to build development theory and policy that is equal to it.

India’s experience encapsulates the stakes of this debate. A country that has achieved remarkable economic growth still grapples with deep pockets of poverty, persistent gender inequality, caste-based exclusion, and climate vulnerability. These are not failures of growth – they are failures of a development model that treated growth as sufficient in itself. The agenda of the political economy of development exists to correct precisely that mistake.

What do you think? If GDP is an inadequate measure of national progress, what should governments be held accountable for instead – and who gets to decide? Does prioritizing social equity in development policy require fundamentally different political institutions, or can existing ones be reformed to deliver more inclusive outcomes?

References

1. https://www.sciencedirect.com/science/article/pii/S0305750X23000876
2. https://casi.sas.upenn.edu/iit/andaleeb-rahman
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4. https://www.stlouisfed.org/open-vault/2023/apr/three-other-ways-to-measure-economic-health-beyond-gdp
5. https://www.thelancet.com/journals/lanplh/article/PIIS2542-5196(24)00147-5/fulltext
6. https://www.activesustainability.com/sustainable-development/alternatives-to-gdp-for-measuring-well-being
7. https://www.sciencedirect.com/science/article/pii/S2542519624001475
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12. https://unicef.org/india/what-we-do/social-policy-inclusion
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14. https://padhai.ai/blogs-padhai/inclusive-growth-upsc-exam