Introduction

Why is the total value of all goods and services produced in 2019 in India only 170 and not, say, 250 trillion rupees? In the language of economics, 170 trillion rupees is the gross domestic product, or GDP, of India in 2019. More generally, the question we shall answer in this chapter is: what determines the level of aggregate output? And if we know how many workers are required to produce one-rupee worth of output, the knowledge of aggregate output also gives us the employment levels. This is the rationale for the title of this chapter as well as that of the following section. The knowledge of aggregate output (Y) and aggregate employment (N) allows us to estimate the output per worker (Y/N), which gives us an indication of the well-being of workers on average. If the GDP is visualised as a large idli (a steamed rice cake), Y/N is a rough indicator of how much of it ‘belongs’ to an individual worker. But as with any average, if the (wage) inequality is high or income distribution is skewed, the average will not be a very meaningful measure.

It is not enough that everyone is employed; the employment must also be secure (reliable) and well paying (gainful). You might be surprised to read that the number of unemployed people in India increased from 17.1 million in 2011 to 23.3 million in 2015 (State of Working India 2018, p. 37) (the nature of [un]employment in India and a prelude to thinking about macroeconomic policies to increase employment are provided in Chapter 7). The absence of India's employment context in this chapter differentiates it from the previous one, where the financial architecture of India was outlined. However, some contextual elements of the Indian macroeconomy are visible in Sections 4.3 and 4.4.

This chapter addresses the first objective of political economy as proposed by Smith (see Section 1.3): “to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves”. How do we begin to think about the reasons for the differences in output per worker (Y/N) in India, on the one hand, and Australia or Denmark, on the other?