High GDP and Environment

Shankar Sharma

While addressing chief ministers of the states in July 2019, Prime Minister Narendra Modi was reported as having said that he wanted India to be a "$5 trillion economy" by 2024. This means roughly doubling of the size of India's economy in 5 years.

As a part of the efforts to accelerate the economic activities of the nation, the Union government of India had announced in February 2018 its decision to set up 12 additional nuclear power reactors. Also being planned and constructed are many coal based and dam based power plants to support the energy demands of such an accelerated economic activity. The country has also embarked on having a total capacity of 175,000 MW of renewable energy by 2022. These are all a part of the 'ease of doing business' environment, and "making India global hub of manufacturing" in addition to massive number of activities/ investments in setting up roads, railways, dams, industries, airports etc. When one also takes note of the official statements that the country has surplus power generating capacity to last for several years, and that the country is looking for opportunities to export electricity, there seems an urgently added need to review the high GDP growth rate paradigm keeping the all-round welfare needs of the country.

In an article in The Hindu of 14.5.2016, C Rangarajan, former Governor, Reserve Bank of India had said: "The "potential" to grow at 8 to 9 per cent at least for a decade exists. We have to make it happen." The successive governments in the country have been focusing on such a high GDP growth rate since 1990s, as the road map to eliminate poverty in the country. After decades of such focus on high GDP growth rate, it has become essential to take a stock of the experience for the society as a whole. The question should be asked whether such a high growth year after year is desirable or whether it is in the true interest of our communities.

Whereas many conventional economic analysts argue that in order to have adequate human development index the country's economy has to grow continuously at a high rate, a densely populated and resource constrained society such as ours cannot afford to ignore the implications of high energy/ material consumption (which will be a consequence of high growth of the economy).

Very often the issues of 'economic development' and 'environment' are wrongly pitted against each other, instead of focusing on how economic development can be achieved on a sustainable basis without compromising on the all-important environment. Since everything one sees around is provided by the nature ,the necessity of harnessing the natural resources on a sustainable basis need not be emphasised. A frenetic growth in non-agricultural sectors, as happening in many states of our Union, can lead to the instability (directly and indirectly) in the production and productivity of food and other agricultural products. Such a probability of lowered agricultural output in the context of huge population, which is estimated to be about 1.5 Billion by 2050, should be a matter of matter of grave concern to our country.

There are also genuine concerns among the environmentalists, that the policy of high GDP growth at any cost is seriously compromising the environment, as evidenced by the deteriorating environment all over the world. The serious concerns on the pollution of air, water and soil, as has been reported from different parts of the country, cannot be ignored any longer. The fact that global warming is clearly associated with hugely deleterious impact on food production should make this issue of even greater concern.

The country has been recording high Gross Domestic Product (GDP) growth rate for many years. Since 1996 onwards the country has logged a high average GDP growth of more than 6% till 2005, and more than 7% since 2006 onwards (World Bank: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG). Such a high growth year after year can lead to the multiplication of the size of the economy as shown in the table below. Whereas a compounded annual growth rate (CAGR) of 4% of GDP will take about 40 years to increase the size of the economy by 4 times, 8% CAGR of GDP will take only 22 years.

If the "potential to grow at 8 to 9 per cent at least for a decade" should be made to happen, as C. Rangarajan has suggested, the country's economy can become double in 9 to 10 years. The doubling of the economy in a decade will have many serious issues to bother the society, besides doubling the "wealth" of the country. The primary question should be whether this doubling of the "wealth" in a decade should also come at a huge cost to some sections of the society, and how much such societal costs are acceptable.

A sustained high GDP growth rate will mean the manufacture of products and provision of services at an unprecedented pace leading to: setting up of more factories/ manufacturing facilities; consumption of large quantities of raw materials such as iron, steel, cement, chemicals etc.; increasing an unsustainable demand for natural resources such as land, water, minerals, timber etc.; acute pressure on the Government to divert agricultural /forest lands; huge demand for various forms of energy (petroleum products, coal, electricity etc.); accelerated urban migration; clamour for more of airports, airlines, hotels, shopping malls, private vehicles, express highways etc. Vast increase in each of these activities, while increasing the total greenhouse gas (GHG, responsible for global warming) emissions, will also add up to reduce the overall ability of natural carbon sinks such as forests to absorb GHG emissions. There will also be increased pollution of land, air and water along with huge issues of managing the solid, liquid and gaseous wastes.

It goes on to say: "India, as one of the fastest growing economies with GDP at 2.6 trillion USD, has increased its material consumption to six times, from 1.18 billion tonnes in 1970 to 7 billion tonnes in 2015, however this economic growth has been coupled with inherent cost on natural environment. The material consumption is projected to more than double by 2030, in order to provide for increasing population, rapid urbanization and growing aspirations. The projected pace of economic development is going to put pressure on the already stressed and limited resources and may lead to serious resource depletion and environment degradation affecting the economy, livelihoods and the quality of life. Further, material use is also closely associated with the problem of increasing wastes, which when suitably processed could deliver valuable secondary resources.

The Club of Rome, which is a global think tank, had raised considerable public attention in this regard way back in 1972 with its report 'The Limits to Growth'. It had predicted that economic growth could not continue indefinitely because of the limited availability of natural resources, particularly oil. In 2011 a book-length article was published as an academic study of 'The Limits to Growth', its methods and historical reception. This article concluded that "The warnings that we received in 1972 ... are becoming increasingly more worrisome as reality seems to be following closely the curves that the ... scenario had generated."

A subsequent joint study by the World Bank and University of Washington released in 2016 has estimated that in 2013 the environmental degradation costs to India, including welfare costs and lost labour income due to air pollution, was of about 8.5 % of its economy.

These World Bank estimates may indicate that the net growth in INDIA'S economy is probably negative when ONE takes the environmental degradation and health costs into objective consideration. In this context, how advisable is it to plan to double the size of the economy in the next 5 years, as the target of $5 trillion economy by 2024 should mean?

It should become clear from these discussions that, whereas it is evident that an economic policy focusing on high GDP growth rate year after year has not resulted in the elimination of poverty in India, it is certainly leading to accelerated depletion of natural resources and to the unacceptable level of pollution of land, water and air, while certainly contributing to global warming phenomenon. Keeping in view the need to contain the global warming and the vastly increasing pollution loading, the relevance of a high GDP growth rate paradigm for the country needs to be effectively discussed at the societal level from the perspective of overall welfare of every section of society.

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Frontier
Vol. 53, No. 35, Feb 28 - Mar 6, 2021