The pandemic proved to be an ideal illustration to understand how GDP is related to productivity and growth. The pandemic led to massive underutilisation of labour and capital. Trade, in general, got reduced, particularly during the lockdowns. There were drops in travel and movement, an increase in the trade costs and a general fall in the demand. As a result, studies showed that the global GDP would fall by 2% because of the pandemic. Developing countries like India were expected to experience an above-average fall in GDP. News reports showed that Indiaʼs GDP contracted by more than 10% during the year. As things return to normal, the GDP will improve but it will be a gradual process. Thus, like the economy, GDP thrives on positive market demand and trade.
GDP, though, may not bring to the fore every aspect of the standard of living in a country. It might not cover certain aspects that could be considered important to the well-being of the average citizen. For instance, increased production might also lead to environmental damage, or come at some such similar cost. Some experts point out that increased GDP in some countries does not necessarily lead to a higher standard of living, particularly concerning vital fields like healthcare and education. Nevertheless, GDP remains one of the most important indicators of national and international economic performance.