Green GDP

The green gross domestic product (green GDP or GGDP) is an index of economic growth with the environmental consequences of that growth factored into a country’s conventional GDP. Green GDP monetizes the loss of biodiversity, and accounts for costs caused by climate change.

Calculating green GDP requires that net natural capital consumption, including resource depletion, environmental degradation, and protective and restorative environmental initiatives, be subtracted from traditional GDP. Some early calculations of green GDP take into account one or two but not all environmental adjustments. These calculations can also be applied to net domestic product (NDP), which deducts the depreciation of produced capital from GDP. In each case, it is necessary to convert the resource activity into a monetary value, since it is in this manner that indicators are generally expressed in national accounts.

Green GDP in India

In 2009, the Centre had announced its intention to unveil “green GDP” figures that account for the environmental costs of depletion and degradation of natural resources into the country’s economic growth figures. Subsequently, the Ministry of Statistics and Programme Implementation set up an expert group in 2011 led by Partha Dasgupta, Professor Emeritus of Economics at Cambridge University, to work out a framework for green national accounts in India.

The Dasgupta-led expert group had submitted its report in March 2013, recommending that economic evaluation be made on the basis of a comprehensive notion of wealth, including aspects such as infrastructure and capital equipment, human capital and natural capital.

Green GDP is expected to account for the use of natural resources as well as the costs involved. This includes medical costs generated from factors such as air and water pollution, loss of livelihood due to environmental crisis such as floods or droughts, and other factors

The externalities of economic growth that are not factored into the conventional GDP numbers have a massive monetary value. A recent study by the World Bank estimates that in 2013 India suffered a loss of over $550 billion, or 8.5 per cent of GDP, just as a result of air pollution. The economic cost of other impacts, such as water pollution and land degradation, among several others, would be much more.

Countries such as China and Norway have already experimented with green accounting. China launched the process in 2004, only to drop it in 2007. Factoring in environmental costs had a significant impact on the country’s perceived “economic growth”, resulting in a hasty departure.

Sources: Wikipedia & The Hindu Business Line

Categories: POINT IAS

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