ECONOMY Vs ENVIRONMENT: THE CHALLENGING TRADE-OFF!

India has jumped six positions from 43rd to 37th on the annual World Competitiveness Index

compiled by the Institute for Management Development. This means that there is greater

allocative efficiency present in the country allowing for rising prosperity and consequently

better economic performance for the nation. However, while India seems to be doing well on

an economic standpoint, the country is not doing as well from an environmental standpoint.

In the World Environment Index released by World Bank, India was placed 180 among 180

nations for environment performance. This rank position implies that India has compromised

on its environmental health which may have been done for the pursuit of better economic

performance and economic growth.

The relationship between economic growth and environmental development has been a key

area of interests for many academics and has the focal point for a variety of economic and

environment theories. The most popular being the inverted U hypothesis of the environmental

Kuznets curve. The theory postulates that at initial development phases the country focuses

on economic growth over environment until high income levels have been reached, post

which the focus shifts to environmental development. The curve’s theoretical breakdown

suggests that with the process of growth the environment degradation sets in but at higher

levels of per capita income, the demand for a cleaner environment also increases. Therefore,

due to the need for pure resources, measures are taken to improve environment. But, when

scrutinized in an Indian context, this concept does not hold good as even though people are

aware of climate change, little has been done to mitigate it. For instance, transport sector has

been one of the fastest-growing along with huge promised expansion of infrastructural

facilities such as highways, railways, metro lines, airports and ports. With this, it is also set to

hold a lion’s share of almost 42% of the overall fossil consumption for year 2021. India’s oil

demand is set to rise by almost 4 million barrels per day and reach 8.7 million barrels by

2040. Though facilities like transportation do increase the pace at which goods are

manufactured and circulated in the economy and thereby push the performance of economy

too, burning of fossil fuels means the equivalent emissions of harmful gases are released into

the atmosphere. Other amenities like electricity too largely depend on non-renewable energy

resources and consequently add to environmental degradation in their ways.

Thus, though the aggregate performance indicators such as GDP are effective in calculating

the overall productive capacity of an economy, they undervalue the individual quality of life

and its unseen insecurities. GDP does not accommodate the social progress indicators that

generally incorporate externalities, climate change and unhappiness as measures of

undesirable social and economic changes. Such a false interpretation limits economic

foresight to a greater extent as environmental impacts are considered only as exogenous

factors and do not attract government attention. The measurement often goes to such adverse

limits that the GDP remains unaffected or even higher post a natural calamity occurs as

employment is generated in the resurrection process. Climate change is also interpreted in a

similar way and the underlying loss of livelihoods which is the real human cost of climate

change goes inappropriately quantified. While nature has contributed in innumerable ways, it

has always been looked at as an input to boost GDP figures and these unsustainable practices

have threatened the climatic and ecological balances.

To make progress from the 180th position that India is placed at in the Environment

Performance Index, it is quintessential to look at alternative measures, either to be included or

derived disjointedly from GDP. One such metric is the Gross Ecosystem Product (GEP) used

to measure the ecosystem’s contribution to the economy and human wellbeing. In India,

Uttarakhand contributes close to RS. 95, 112 crores through its biodiversity reserves and in

2021 the state-government planned to introduce GEP to value its natural resources and

prevent degradation. Though its empirical significance is still being researched, it seems to be

a good fit to assess the value of ecosystem services like clean water, soil quality, air quality,

healthcare and wellbeing in monetary terms. By doing so, people consuming such benefits

would become conscious of preserving environment and channel resources towards the

enhancement of those areas which have been placed in the peripherals, away from the central

growth strategies.

To move along the lines of both economic growth and environmental protection,

conventional approaches to production must be opted. The phenomenon of climate change,

loss of biodiversity, pollution and depleting quality of life suggest that continuing with the

same short-sighted growth strategies can never direct the nation on the path of sustainability.

United Nations Environment Programme UNEP’s Becoming#GenerationRestoration

estimated that close to half of the output produced in the world relies on natural resources and

every dollar invested in restoration of such resources would generate 30$ worth of economic

benefits. To achieve the goals of sustainability, India has also implemented a few energy-

consuming schemes such as launching solar-powered trains which could replace almost

12,000 litres of diesel every year. With the Budget 2021, the government also launched the

Vehicle Scrappage Policy to replace old vehicles with new ones and target controlling

pollution too. These policies indicate that India is heading on the path of sustainability.