According to a recent Reserve Bank of India paper, India’s green gross domestic product recorded faster growth than traditional GDP.
This was made possible by taking measures to cut carbon emissions, improve resource use efficiency and boost clean energy capacity.
Key points
- While traditional GDP accelerated at an annual average pace of 6.27% and 6.61% in the 2000s and 2010s, the “green GDP” rose 6.34% and 6.71%, respectively.
- The trend had been the opposite in the past three decades of the 20th century, implying that the growth in that period was more damaging to the environment.
What is Green GDP?
- Green GDP adjusts the conventionally calculated GDP for the environmental costs of economic growth.
- It is less than GDP if economic growth is not eco-friendly and was around 6% lower in 2019, the last year covered in the paper.
- At the turn of the millennium, it was lower by around 8%.
- A smaller deficit now means India has been able to cut down on environmental losses.
- The green GDP formula starts with annual GDP at 2015 prices, from which it subtracts various damage costs to the environment each year while adding the expenditure by the government on environmental protection.
- The green GDP (G3) in 2019 stood at ₹165.9 trillion, while the conventional GDP at 2015 constant prices was ₹175.8 trillion.
- A common criticism of how GDP is calculated is that it ignores the cost of degradation of the environment and, therefore, is short-sighted in its approach.
- The RBI paper reviews the relation between environmental pollution and GDP of an economy – the Environmental Kuznets Curve (EKC), in particular.
- The EKC argues that in the initial phases of economic development, there seems to be a positive relationship between pollution level and per capita income.
- The United Nations first proposed the idea of green GDP in 1993.
Measures in direction of Green GDP
- Established in 2003, one of the earlier initiatives in India in relation to accounting of natural resources is the Green Indian States Trust (GIST).
- The GIST started a project – Green Accounting for Indian States & Union Territories Project (GAISP) to build a framework for environmentally adjusted national income accounts.
- The GAISP aimed to arrive at annual estimates of adjusted state national income. The first phase of the project produced eight reports, covering estimates for forest and forest products in India, agricultural cropland, sub-soil assets, ecotourism, freshwater resources, etc.
- All those reports provided comprehensive and details accounting methodology and estimation of India’s natural resources.
- In the recent years, the Natural Capital Accounting and Valuation of Ecosystem Services (NCAVES) project was launched in 2017 by the United Nations (UN) and the European Union to enhance knowledge and accounting process for ecosystem accounting as per the SEEA (System of Environmental Economic Accounting ) framework.
- The Ministry of Statistics and Programme Implementation (MOSPI) initiated the compilation of environmental accounting under the NCAVES.
- The primary aim was to provide an estimation of India’s stock and flow of natural assets, as per the SEEA.
- A similar project was carried out by the Directorate of Economics and Statistics (DES), Government of Uttarakhand with collaboration of the Indian Institute of Forest Management (IIFM) in 2018. The project tried to provide a framework for green accounting of land, water, minerals, forests for the state of Uttarakhand to arrive at an estimate of the economic value of the state’s forest resources and its contribution to GDP.
