April 5, 2013
New Delhi

PM’s address at the International Workshop on Green National Accounting for India

“I am delighted to join you on this occasion of this Workshop on developing a framework for Green National Accounting for India. It is indeed a great pleasure to see here such a large gathering of national and international experts in the fields of economics, statistics and environment accounting. I am particularly happy to see my old friend and one of the most distinguished economists in the world, Prof. Sir Partha Dasgupta, leading this important initiative for us. This event is particularly timely and relevant in view of the launch of India’s Twelfth Five Year Plan, which has faster, more inclusive and sustainable growth as its core objective. I believe India can and should take a leadership role in clarifying the concept of sustainable development.

India’s commitment to planned economic development reflects the government’s determination to improve the economic conditions of our people and an affirmation of the role of the government in bringing about this outcome through a variety of social, economic, and institutional initiatives. But as the economy develops the capacity to grow rapidly, it gives rise to many new challenges. For instance, natural resources are limited, and final. And one needs to decide how to use these scarce resources optimally, both from the economic development and the sustainability perspectives.

Often, economic policies designed to promote growth have been implemented without considering their full environmental consequences, presumably on the assumption that these consequences would either take care of themselves or could be dealt with separately. There is evidence to suggest that such policies may actually result in a net decrease in human well-being. Even though it is not easy to quantify this concept. Globally, environmental degradation is manifesting itself through the loss of fertile soils, desertification, decreasing forest cover, reduction of fresh water availability, and an extreme loss of bio-diversity. These are serious consequences, and it has become clear today that economic development must be environmentally sustainable.

As defined by the Brundtland Commission in 1987, and Nitin is sitting here he was the principal author of this report. “Sustainable Development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Much has been written on the concept of sustainable development but by and large it has remained so far a buzz word. It requires lot of sustained high quality work to give new meaning and content to the concept of sustainable development. Again, the fact that economic growth and development have to be guided by the compulsion of sustainability is an idea which is now widely accepted.

Through planned economic development, India aims to attain economic growth and poverty alleviation, and doing so in a sustainable manner. This is all the more important since a significant segment of India’s population, particularly the rural poor, depends on natural resources for their subsistence and earning their livelihood. The poor need to be fully factored in when we deliberate the calculus of growth, which can be sustained only if natural resources are managed on a sustainable basis.

Keeping this in mind, and also because natural capital is an important component to planned investment in achieving development goals, India’s Twelfth Five Year Plan has, for the first time, mainstreamed sustainability as its primary goal. The Plan document notes that economic development will be sustainable only if it is pursued in a manner which protects the environment, and that there is a need to pay greater attention to the management of water, forest and land resources.

There has been a long-standing argument that contemporary national accounts systems do not adequately account for the costs arising out of the use of environmental and natural resources and that GDP is not the best way of measuring the true well-being of nations because the pursuit of growth can be at the cost of degradation of environment. Current literature considers mainly two methods for accounting of environmental services in national income accounting. One suggests the extension of conventional national income accounts by developing satellite accounts of environment and natural resources. The other suggests extension of input-output tables for the economy as a whole.

As a possible solution to the limitations of national income accounting, integrated environmental and economic accounting has emerged as a new concept. The main objectives of this concept are segregation and elaboration of all environmental and economic accounts, linkages of physical resources accounts with monetary environmental accounts and balance sheets, assessment of environmental costs and benefits, and accounting for the maintenance of tangible wealth.

In this regard, the work done by Prof. Sir Partha Dasgupta and his colleagues in developing a conceptual framework for an “ideal” system of economic measurement is truly seminal. Their central conclusion about the need to measure economies on the basis of a comprehensive definition of wealth and not GDP alone is noteworthy. I am sure that the concepts outlined in this Report will form the underpinning of further studies and help develop precise tools for “green” measurement.

The Government of India has taken several initiatives aimed at greening the Indian economy. A number of national strategies and policies, which inculcate the principle of sustainability, are already in place. For example, we have set up a National Clean Energy Fund by imposing a cess on coal and have also created a Compensatory Afforestation Fund.

The National Environmental Policy, 2006 articulates that only such development is sustainable which respects ecological constraints and the imperatives of social justice.

The National Agricultural Policy focuses on sustainable development of agriculture by promoting technically sound and economically viable, environmentally non-degrading, and socially acceptable uses of the country’s natural resources.

The National Electricity Policy underscores the use of renewable sources of energy.

India’s National Action Plan on Climate Change provides a clear strategy for addressing the challenges posed by climate change. An Expert Group for Low Carbon Strategies for Inclusive Growth has also been set up. India has also made a voluntary domestic commitment to reduce, by the year 2020, the emissions intensity of our GDP by 20-25 percent as compared to 2005 levels. Some State Governments are also proposing to experiment with Emissions Trading Schemes to reduce the level of ambient air pollution near major industrial clusters.

A new initiative that is worth mentioning is the programme of the Ministry of Rural Development for “greening” rural development. This comprises activities that regenerate and conserve the natural resource base and use clean materials, technologies and processes to create environment friendly products, livelihoods, enterprises and jobs. This can stimulate rural economies, help maintain critical ecosystem services and strengthen the climate resilience of the rural poor.

While it is expected that the above policies and initiatives will contribute to a green bottom-line in India’s national accounts, I do not doubt the difficulties that will be encountered in capturing a diverse set of variables in a statistical framework and compiling the accounts from a truly green perspective. But, I am equally sure that the deliberations of your Workshop will succeed in delivering practical solutions to the problems of measuring the interaction between the economy and the environment. I hope the Ministry of Statistics and Programme Implementation, in consultation with the Planning Commission and the Ministries concerned, will take a leading role in implementing the recommendations of this very important Group.

Once again, I thank Prof. Dasgupta and his colleagues for their work and I wish this Workshop all success.”