Low GDP growth is getting to be a serious cause of concern for the economy.
There are apprehensions that this would have a negative impact on the growth of employment, income and livelihood opportunities.
However, offering an environment perspective brings out a possible beneficious side to economic slowdown.
How are economic growth and environment related?
Rapid industrialisation and urbanisation are inevitable to bring in desired levels of economic development.
This is also believed to be essential to substantially increase the per capita income.
However, these income-generating activities are sure to have negative environmental consequences such as pollution.
Noticeably, environmental quality is being compromised for the goals of mass employment generation and poverty reduction.
It is believed that with gradual increase in income levels along with growth in financial and technological capabilities, environmental quality could be restored.
But the reality is that the continued growth generating activities only increasingly deteriorates the environmental quality.
What is the economic significance of the environment?
The economic significance of the environment is evident with the range of ecosystem services that it offers. These include:
Millions of households and economic activities utilise these ecosystem services for production and consumption.
However, despite this high economic value, ecosystem services are not traded in the markets.
Their true values are thus not reflected in the economic system.
What is the case with India?
The above picture explains the shortfall of unrecognised economic significance of the environment.
In India, the current method of GDP calculation treats environmental damage costs as income(as it is compensated with the income in other sectors such as the industry).
This is misleading because it accounts only the environmental damage.
The inherent economic potential that is lost due to the environmental damage is unaccounted.
Evidently, various studies have estimated the huge environmental damage cost and welfare loss due to the higher level of economic growth maintained in recent years.
Notably, these costs and losses are equivalent to around 5-7% of the GDP in various years.
This picture is despite the underestimations due to non-availability of data.
Because, quantifying the unsystematised ecosystem services for damage assessment is a difficult task.
Thus the economic welfare lost due to the loss of ecosystem services will be much higher than the current estimations in India.
What is desired?
The low GDP growth is for sure a negative thing in many respects.
However, in view of sustainable development, "low growth" could also imply a more "protected environment".
Consequently, the economic and social benefits that a healthy environment offers is considerably higher than that of a GDP growth at the cost of the environment.
Thus ensuring a quality environment can actually push income growth on a more sustainable and meaningful basis.
Given all these, the challenge of uncertainty in determining environmentally desirable growth rate cannot be denied.
However, maintaining 5-6% growth rate with strict environmental regulation is supposed to be a balanced one.
In this line, the government can consider market-based instruments such as pollution tax and tradable pollution permits as pollution control measures.
Environmental accounting and green GDP for India could be other possible tools.
