Green GDP

What is 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. 

What is the problem?

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.

25 per cent of India’s total land is undergoing desertification, while 32 per cent is facing degradation. This has a direct impact on the future food production capacity of our agrarian economy as the country could see a 10-40 per cent loss in crop production by the end of the century.

Overlooking such data in national income calculations would be a huge mistake.

Source: The Hindu Business Line

The Estimates Committee of the Parliament has suggested that the current manner in which the Gross Domestic Product (GDP) is measured needs an overhaul as it provides an incomplete estimation of economic activity.

Issues with the current method of calculation of GDP – The current method of calculation of GDP does not measure:

  • Does not measure the depletion of natural resources.
  • It ignores the economic contribution of women in running households.
  • It does not factor the change in output quality due to technological advances.
  • It does not factor the impact of artificial intelligence in employment.
  • It does not measure weather GDP adds to the happiness of the citizens.

Source: The Hindu

The motivation for creating a green GDP originates from the inherent limitations of GDP has as an indicator of economic performace and social progress. It only assesses gross output, and does not have a mechanism for identifying the wealth and assets that underlie output. This is problematic because it cannot account for permanent or significant depletion or replenishment of these assets and thus it cannot be identified if the income generated is sustainable.The need for a more comprehensive macroeconomic indicator is consistent with the conception of sustainable development as a desirable phenomenon.


How would Green GDP help?

Green GDP would arguably be a more accurate indicator or measure of societal well-being. The integration of environmental statistics into national accounts, and by extension, the generation of a green GDP figure, would improve countries’ abilities to manage their economies and resources. Countries such as China and Norway have already experimented with green accounting

Steps taken by the government:

The government announced in June 2018 that the government will begin a five-year exercise to compute district-level data of the country’s environmental wealth. The numbers will eventually be used to calculate every State’s ‘green’ Gross Domestic Product (GDP). The metric will help with a range of policy decisions, such as compensation to be paid during land acquisition, calculation of funds required for climate mitigation, and so on.

The government has also launched a ‘green skilling’ programme under which youth, particularly school dropouts, would be trained in a range of ‘green jobs’— as operators of scientific instruments used to measure environmental quality, as field staff in nature parks, and as tourist guides. Some of the labour required for the survey would also be sourced from the green-skilled workforce.

Source: The Hindu

Challenges to the implementation of Green GDP

  • Lack of micro level data on natural capital – India is a diverse country with resources spread out over a vast expanse. In order to conduct a comprehensive analysis of impact of use of resources, the collection of data would be a humongous task.
  • Formulating a standard of computation – With particular resources being put to multiple uses, a standard formula of conversion to quantifiable data would be required.
  • Enhanced budget and finding skilled manpower – There is a need for enhanced budgeting and hiring skilled manpower for the collection of data.

Categories: POINT IAS

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