Ministries pooling data to account for environmental damage in GDP

NEW DELHI: India has taken the first step to account for environmental damage while calculating its national income or gross domestic product. Various ministries have begun pooling data to create environment accounts for forest cover, water, waste and soil resources, among others, under a newly introduced System of Environmental Economic Accounting.

The work has just started on the system which can eventually yield benchmarks such as sustainability index and biodiversity index, officials said. The system, similar to the System of National Accounts that is followed to calculate economic growth, has been mandated by the United Nations Statistical Division, they said.

“We are in the process of collecting data, but there are many gaps. This is the preparatory stage...We are talking to other ministries if they can give us some data,” said a statistics ministry official, who did not wish to be identified. The statistics ministry has circulated a framework to other ministries to provide data for this endeavour which is designed to present a comprehensive picture of India’s growth.




An expert committee set up by the statistics ministry in 2013 chaired by Partha Dasgupta, emeritus professor at the University of Cambridge, had said that the system of national being used across the world suffers from “extreme narrowness”.

The committee said that the demand for green national accounts has arisen because of a growing recognition that contemporary national accounts are an unsatisfactory basis for economic evaluation.

It went on to define depreciation as not only the wear and tear of buildings and equipment but also the loss of human capital and quality degradation of natural capital.

Pollutants are best seen as the reverse side of natural capital, the committee said. “The way to conceptualise pollution is to turn one’s mind to the depreciation of capital assets pollution brings in its wake,” it said. However, the task is a mammoth one given the absence of any operating manual on how to work on the new system.

“Creating green accounts is a complex issue. For example, to prepare water account, we need data on surface water, groundwater and glaciers.

Glacier data can only come from satellite images,” the official said. Paucity of data will make things difficult for the government, especially since there no precedents in this field in other countries from which it can emulate best practices.

“There are challenges in putting value to the services provided by natural resources like biodiversity and prevention of soil erosion in case of forests,” said economist Nitin Desai, a former under-secretary-general of the UN who was a member of the expert panel. “However, just like conventional GDP calculations, approximations will be needed to make these accounts. If we do this, we’ll be the pioneers of green national accounting.”

ET view: The Right step
This is a good initiative. With climate change impacts and sustainability emerging as crucial considerations in economic and development policy making, it is time to rely on a measure of economic progress that takes into account the value of natural resource, human capital and infrastructure. By getting the ministries involved, the government has signalled that it is very serious in its intent. It can draw on the Partha Dasgupta-led expert committee’s report, which provides a framework on moving forward from the existing system of accounts to a broader measure, and an outline of the data that would be required to produce a comprehensive set of the national accounts.