Green National Accounting System in India: Civil Services Mentor Magazine June 2013

Government in 2011 had constituted an expert group under the chairmanship of Pratha Dasgupta from the Cambridge University to develop a framework for green national accounts, identification of data gaps and preparation of a road map for its implementation. The system of green national accounting would take into account the environmental costs of development and reflect the use of precious depletable natural resources in the process of generating national income. The need for green national accounts emerged as there was a growing recognition that contemporary national accounts were becoming unsatisfactory basis for economic evaluation. “The qualifier ‘green’ signals that we should be especially concerned about the absence of information on society’s use of the natural environment.” Double-digit GDP fixation is threatening India’s biodiversity and its long-term growth and security. Green accounting methods have estimated the loss of ecological wealth in India. GDP measures the value of output produced within a country over a certain time period. However, any depreciation measurements used, will account only for manmade capital and not the negative impact of growth on valuable natural capital, such as water, land, forests, biodiversity and the resulting negative effects on human health and welfare. Over the course of the last fifty years, India has lost over half its forests, 40 per cent of its mangroves and a significant part of its wetlands. At least 40 species of plants and animals have become extinct with several hundred more endangered.

In “green accounting” approach national accounts are adjusted to include the value of nature´s goods and services. Mr Jairam Ramesh, the former environment minister, advocated greening India’s national accounts by 2015 and encouraged policy makers to recognise the trade-off between pursuing high growth economic policies against the extensive impact they could have on India’s natural capital. The Green Indian States Trust (GIST) which, in 2003 unleashed a series of environmentally adjusted accounts under the Green Accounting for Indian States Project. According to their results, the loss of forest ecological services (i.e.soil erosion prevention, flood control and ground water augmentation) over three years (2001-03) due to declining dense forests was estimated at an astounding 1.1 per cent of GDP. According to GIST´s latest results, the North-Eastern states continue to be most affected, particularly Arunachal Pradesh and Mizoram where the loss of forest ecological services is more than 12 per cent of their NSDP.

India expects to put in place in five years a system of green national accounting that would take into account the environmental costs of development and reflect the use of precious depletable natural resources in the process of generating national income. “In the last few months, I have tried to set the ball rolling so that by 2015 at least we can have a system of green national accounting,” Union Minister of State for Environment and Forests Jairam Ramesh said here. Economists estimate gross domestic product (GDP) as a broad measure of national income, while net domestic product (NDP) accounts for the use of physical capital. “But as yet, we have no generally accepted system to convert gross domestic product into green domestic product that would reflect the use up of precious depletable natural resources in the process of generating national income”, he said. Economists all over the world have been at work for quite some time on developing a robust system of green national accounting but “we are not there as yet”. “Ideally, if we can report both gross domestic product and green domestic product, we will get a better picture of the trade-offs involved in the process of economic growth”, the Minister added. India expects to put in place in five years a system of green national accounting that would take into account the environmental costs of development and reflect the use of precious depletable natural resources in the process of generating national income.