Factor in India's environmental loss and all we have is negative growth

Since liberalisation, India’s average GDP growth rate has been 6.6 percent. During these two decades, both ecological footprint and bio-capacity (availability of natural resources) per capita have shrunk. The diminishing footprint means that the average Indian is not using more resources, as he/she would have had his/her economic status improved. But, paradoxically, the shrinking bio-capacity shows that resources are getting scarce.

If the average Indian is not getting richer (or less poor) and yet India’s resources are disappearing, the only plausible explanation is that some Indians must be enjoying particularly high standards of living and floating on assets made of those resources. Our 55 billionaires are worth $189 billion or two times the country’s fiscal deficit and India Inc is sitting on cash and cash equivalents of over $166 billion.

Of course, they have earned it, thanks to various incentives (no, not subsidies which are meant for the poor) offered by the state to fuel, what else, economic growth. But that 6.6 percent growth never factored in the drain on natural resources and the environment. Usually dismissed as a neo-Luddite concern, the idea of such a reality check did not escape, of all establishments, the World Bank that peddles the panacea of rapid growth across the world.

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On 17 July, the Bank released a report - Diagnostic Assessment of Select Environmental Challenges in India - that explored roadmaps to sustainable growth. The study’s admittedly conservative estimate of air and water pollution, scarcity of water, lack of sanitation, loss of soil, pastureland and forests puts the cost of damages at 5.7 percent of our GDP.

The report makes it clear that lack of data did not allow it to factor in loss of fisheries, biodiversity, non-use (ecological) value of forests etc which would have significantly added to the damage. For example, the non-use and bio-prospecting value of forests could be as much as 6-20 times the use values. Clearly, the total cost of environmental damage far outweighs the 6.6 percent growth in GDP.

The Bank study says that particulate pollution (PM10) from the burning of fossil fuels has serious health consequences, amounting to 3 percent of India’s GDP. Of this, the impact of outdoor air pollution accounts for the highest share, at 1.7 percent, followed by the cost of indoor air pollution at 1.3 percent. Sustained exposure of the young and productive urban population to particulate matter pollution results in substantial cardiopulmonary and Chronic Obstructive Pulmonary Disease mortality.

A significant portion of diseases caused by inadequate water supply, sanitation and hygiene affects by children under 5. About 23 percent of child mortality in India could be attributed to environmental degradation, the report says. Cropland and pastureland damages arise from the decline in the value of crops due to topsoil erosion, water logging, salinity and overgrazing, while unsustainable logging practices and over-exploitation of forest resources cause forest degradation.

The report pegs the total cost of these environmental damages at $80 billion. If that sounds over the top, consider this: 14 million people were forced to quit agriculture at the peak of economic growth between 2004-05 and 2009-10; every year, urban air pollution causes 3,70,000 hospitalisations, killing 1,16,500; the health impact of poor water supply and sanitation costs nearly Rs 500 billion annually; and pastureland degradation amounts to loss of Rs 400 billion worth fodder and cattle.

If it is any consolation, China’s green deficit bill amounts to 9 percent of its GDP which nearly wipes out the country’s average GDP growth rate of 9.91 percent during 1979- 2010. But what this really shows is that nowhere in the world can the model of rapid, resource-intensive and no-holds-barred growth can work any miracle. From Iran (7.4 percent of GDP) and Egypt (4.8 percent) to Ghana (9.6 percent) and Peru (3.9 percent), the story is equally self-defeating across the developing world.

Can we fix it once we have arrived? The lead author of the Bank report does not think so. “Grow now and clean up later will not be environmentally sustainable for India in the long run,” says senior environmental economist Muthukumara S Mani, claiming that “a low-emission, resource-efficient greening of the economy is possible at a very low cost in terms of GDP growth”.

For example, the study estimates that a 10 percent reduction in particulate emission by 2030 will cause a mere 0.3 percent GDP loss compared to business as usual. If the reduction target is tripled to 30 percent, the corresponding loss to GDP rises to just 0.7 percent or about $97 billion. Significantly, this results in a net economic gain as the study puts the savings from reduced health damages due to 30 percent reduction at $105 billion.

For some reason, the study does not offer any cost-benefit projection for particulate emission reduction beyond 30 percent and prescribes indirect fiscal measures instead of binding regulations for achieving this modest target. But coming from the Bank, that is probably as good as it gets.

The findings of this study are a pointer to the measurability of green growth which is the only means to quantify economic progress, particularly in a country that thrives on its natural ecosystems and rich biodiversity. As per the report’s conservative estimates, the value of ecosystem services from various biomes across the country amounts to about 3-5.0 percent of GDP. In actual terms, this is likely to be several times higher as we will realise when more reliable and extensive data becomes available for green accounting.

But the message is clear. “Conventional measures of growth do not adequately capture the environmental costs, which have been found to be particularly severe at the current rapid growth rates. There are also tools available now to estimate the significant contribution of natural capital in the form of ecosystem services. Therefore, it is imperative to calculate green Gross Domestic Product (green GDP) as an index of economic growth with the environmental costs and services factored in,” says Mani in a Bank release.

Otherwise, business as usual will continue to result in diminishing resources and increasing poverty, making more and more people fight over the shrinking natural reserve. The few wealthy will keep getting wealthier, till there is not much left - not even food, or water - to sell or buy.