Almost ten years after the United Nations and World Bank developed alternative macro-indicators for environmentally adjusted and sustainable national income and products, the Government of India is finally making efforts to estimate Green GDP or environmentally-adjusted GDP which includes valuation of natural resources in the computation of the country's gross domestic product (GDP).
This is based on the System for Integrated Environmental and Economic Accounting (SEEA) laid out by the United Nations statistical division and seeks to illustrate the interrelationships between the natural environment and the economy.
"Measured this way, the value of a tree in India comes to around Rs 7 lakh," says minister for statistics, Maneka Gandhi.
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"The value of a tree is not measured only in terms of the timber it produces. It would also include the value of the oxygen it generates and the sulphur di-oxide it absorbs, both of which have a direct impact on the health of the people living in an area," she adds.
Currently, cutting down trees for market use of timber only adds corresponding value to GNP, but nowhere is the depletion of the natural resource wealth that's occurring accounted for.
The department of statistics has just completed a pilot project on natural resource accounting in Goa. The project aims to develop a method to value economic activities like mining. While benefits are measured in terms of the money earned, the costs include not only the usually considered wages and salaries and capital costs, but also the increased water and soil pollution, associated deforestation and depleted level of reserves for future use.
Quantification and valuation of factors like quality of water is difficult but the project aims to develop a methodology to put a monetary value to them. The way national accounts are currently computed, only the value of the higher level of production of the mined ore is reflected. However, the long term costs of the mining project are much higher, say officials.
Currently, rough estimates by various organisations put the natural resource cost of productive activity at around 5 per cent of the GDP, they add. Tata Energy Research Institute in its project called GREEN India 2047, had estimated that India is losing over 10 per cent of its GDP annually on account of environmental costs. They had also estimtated that between 11 to 26 per cent of the country's agricultural output is being lost on account of soil degradation.
"The normal accounting system takes money as the be all and end all, but if there is nothing to buy with the money, it is of no use," Gandhi adds. This requires lateral thinking, says Gandhi. In the case of trees, she says that they help in lowering the temperature in an area, which directly reduces the need for air-conditioners and therefore electricity.
While initially, the natural resource account will be a satellite account, eventually, the aim is to integrate environmental statistics with the national accounts. This would help in taking suitable decisions on the optimal utilisation of resources for sustainable development and in computing Green GDP.