{"id":34383,"date":"2018-10-30T17:19:34","date_gmt":"2018-10-30T11:49:34","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=34383"},"modified":"2018-10-30T17:19:34","modified_gmt":"2018-10-30T11:49:34","slug":"economic-growth-an-alternative-view","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/economic-growth-an-alternative-view\/","title":{"rendered":"Economic growth: an alternative view:\u00a0"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/todays-paper\/tp-opinion\/economic-growth-an-alternative-view\/article19908789.ece\"><span style=\"font-weight: 400;\">Economic growth: an alternative view<\/span><\/a><span style=\"font-weight: 400;\">:\u00a0<\/span><\/p>\n<p><b>Context<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">India\u2019s current method of GDP calculation treats environmental damage costs as income.<\/span><\/li>\n<\/ul>\n<p><b>What is GDP?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">GDP stands for Gross Domestic Product. It is the final value of the good and services produced within the territory of the country<\/span><\/li>\n<\/ul>\n<p><b>Decline in GDP<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">India\u2019s decelerating GDP growth rate in the past five quarters has generated panic. A drop in GDP growth rate from 7.4% in January-March 2016 to 5.7% in April-June 2017.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">This decline provide an opportunity to bring economic welfare through improvement in environment quality<\/span><\/li>\n<\/ul>\n<p><b>Economic development v\\s development<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Economists concerned about sustainable development advocate low levels of economic growth since with large expansions in national income come negative environmental consequences such as pollution. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">These adversely affect the environmental quality and economic welfare of individuals and households dependent on the environment for their basic livelihood.<\/span><\/li>\n<\/ul>\n<p><b>The Indian context<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Studies that have attempted to estimate the economic costs of environmental damages in India have revealed some striking findings. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Study by the World Bank and the Institute for Health Metrics and Evaluation at the University of Washington found that India\u2019s air pollution alone caused welfare loss equivalent to 7.69% (approximately Rs. 31,316.2 billion) of its GDP in 2013.<\/span><\/li>\n<\/ul>\n<p><b>Problem of quantification of Ecosystem services<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The environment generates a range of ecosystem services such as provisioning services (food, irrigation, drinking water), regulating services (climate regulation, water quality regulation), cultural services (recreational and religious services) and supporting services (nutrient recycling, soil formation). Identifying and quantifying them for the purpose of damage assessment is a difficult task in the absence of relevant data.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">In India, millions of households and economic activities utilise these ecosystem services for production and consumption.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Though economically highly valuable, ecosystem services are not traded in the markets and, therefore, their true values are not reflected in the system. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Therefore, the actual value of economic welfare lost due to loss of ecosystem services will be much higher than what is being currently estimated.<\/span><\/li>\n<\/ul>\n<p><b>Issue with GDP calculation<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The current method of GDP estimation treats environmental damage costs as income. Since development policies give more priority to income and employment generation, implementation of pollution control policies are very poor. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">At present, the price of a commodity from a polluting unit covers only the private cost of production, not the damage cost. This makes the commodity relatively cheaper leading to more demand and output, and more pollution and environmental damage cost. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">More environmental damage may lead to an increased level of purchase of market goods contributing to expansion of the GDP. <\/span><\/li>\n<\/ul>\n<p><b>Environmental cost <\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">An important lesson from empirical studies on environmental damage is that the size of environmental social costs is significantly higher than the social benefits being brought about by GDP growth.<\/span><\/li>\n<\/ul>\n<p><b>What is \u00a0Environmental Kuznets Curve (EKC) hypothesis?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Environmental Kuznets Curve (EKC) hypothesis that underlines almost all our development policies, which are directed towards pushing double-digit income growth with little concern for environmental capital. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The EKC hypothesis is shown in an inverted U-shaped curve depicting the relationship between per capita income and environmental deterioration.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It suggests that during the initial period of economic development, where per capita income is low, deterioration of environmental quality caused by rapid industrialisation and urbanisation is inevitable. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Society will have to accept a certain level of environmental damage arising from income-generating activities because large-scale income growth is essential for achieving other development goals such as generation of mass employment and poverty reduction. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Once per capita income reaches a higher level, the trade-off between income growth and environmental quality will cease to exist. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">With increased financial and technological capabilities, we can restore the environmental quality to desired levels. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">So, income growth on a higher path brings a win-win outcome in the long run where poverty is reduced and environmental quality is improved.<\/span><\/li>\n<\/ul>\n<p><b>Why EKC is a faulty approach?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The EKC is a near myth since an increase in per capita income does not bring desirable levels of improvement to the environment. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The empirical evidence across countries reveals that various attempts to increase per capita income causes more environmental deterioration. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A large number of poor people are dependent on the environment for their day-to-day activities and therefore more focus on improved environmental quality can push income growth on a sustainable basis.<\/span><\/li>\n<\/ul>\n<p><b>Conclusion<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Since GDP growth and environmental damage have a strong positive relationship, lower growth in GDP could afford benefits.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A proper assessment of environmental social benefits and social costs of income growth is warranted so that policies can be directed towards setting environmentally sustainable growth rates.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Efforts to develop environmental accounting and green GDP for India can help us achieve sustainable development in future.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Economic growth: an alternative view:\u00a0 Context India\u2019s current method of GDP calculation treats environmental damage costs as income. What is GDP? GDP stands for Gross Domestic Product. It is the final value of the good and services produced within the territory of the country Decline in GDP India\u2019s decelerating GDP growth rate in the past&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/economic-growth-an-alternative-view\/\">Continue reading <span class=\"screen-reader-text\">Economic growth: an alternative view:\u00a0<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-34383","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704647572},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34383","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=34383"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34383\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=34383"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=34383"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=34383"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}