What is the issue?
- Low GDP growth is getting to be a serious cause of concern for the economy.
- There are apprehensions that this would have a negative impact on the growth of employment, income and livelihood opportunities.
- However, offering an environment perspective brings out a possible beneficious side to economic slowdown.
How are economic growth and environment related?
- Rapid industrialisation and urbanisation are inevitable to bring in desired levels of economic development.
- This is also believed to be essential to substantially increase the per capita income.
- However, these income-generating activities are sure to have negative environmental consequences such as pollution.
- Noticeably, environmental quality is being compromised for the goals of mass employment generation and poverty reduction.
- It is believed that with gradual increase in income levels along with growth in financial and technological capabilities, environmental quality could be restored.
- But the reality is that the continued growth generating activities only increasingly deteriorates the environmental quality.
What is the economic significance of the environment?
- The economic significance of the environment is evident with the range of ecosystem services that it offers. These include:
- provisioning services (food, irrigation, drinking water).
- regulating services (climate regulation, water quality regulation).
- cultural services (recreational and religious services).
- supporting services (nutrient recycling, soil formation).
- Millions of households and economic activities utilise these ecosystem services for production and consumption.
- However, despite this high economic value, ecosystem services are not traded in the markets.
- Their true values are thus not reflected in the economic system.
What is the case with India?
- The above picture explains the shortfall of unrecognised economic significance of the environment.
- In India, the current method of GDP calculation treats environmental damage costs as income(as it is compensated with the income in other sectors such as the industry).
- This is misleading because it accounts only the environmental damage.
- The inherent economic potential that is lost due to the environmental damage is unaccounted.
- Evidently, various studies have estimated the huge environmental damage cost and welfare loss due to the higher level of economic growth maintained in recent years.
- Notably, these costs and losses are equivalent to around 5-7% of the GDP in various years.
- This picture is despite the underestimations due to non-availability of data.
- Because, quantifying the unsystematised ecosystem services for damage assessment is a difficult task.
- Thus the economic welfare lost due to the loss of ecosystem services will be much higher than the current estimations in India.
What is desired?
- The low GDP growth is for sure a negative thing in many respects.
- However, in view of sustainable development, "low growth" could also imply a more "protected environment".
- Consequently, the economic and social benefits that a healthy environment offers is considerably higher than that of a GDP growth at the cost of the environment.
- Thus ensuring a quality environment can actually push income growth on a more sustainable and meaningful basis.
- Given all these, the challenge of uncertainty in determining environmentally desirable growth rate cannot be denied.
- However, maintaining 5-6% growth rate with strict environmental regulation is supposed to be a balanced one.
- In this line, the government can consider market-based instruments such as pollution tax and tradable pollution permits as pollution control measures.
- Environmental accounting and green GDP for India could be other possible tools.
Source: The Hindu
