India's Transition to a
Sustainable Economy
India's recent development experience has been both a spectacular
success as well as a massive failure. While our economy has grown
steadily, this growth has come at the cost of environmental
sustainability and has failed to translate into better living conditions
for the majority of the Indian population.
The Indian economy is currently the fastest growing large economy in the
world. Our GDP has grown at the rate of almost 7.7% in the last decade
and was worth Rs 113.5 lakh crore in 2015-16 at constant (2011-12)
prices. It is forecasted that the Indian economy will continue to grow
at over 7% in 2016-17 and could reach 8% or more in the next two years
(Economic Survey).
While this growth has undoubtedly led to some improvements in the social
indicators, this improvement is far from satisfactory. With a Social
Progress Index (SPI) of 53.92/100, India ranked 98 out of 133 countries
in social progress in 2016 (Social Progress Report, 2016). The SPI is
calculated by aggregating
53 indicators covering three dimensions: basic human needs (including
nutrition and basic medical care, water and sanitation, shelter and
personal safety), foundations of wellbeing (including access to basic
knowledge, access to information and communications, health and wellness
and environmental quality), and opportunity (including personal rights,
personal freedom and choice, tolerance and inclusion and access to
advanced education).
Additionally, this growth has come at huge environmental costs. With an
Environmental Performance Index (EPI) of 53.58/100, India ranked 141 out
of 180 countries in environmental performance in 2016 (Environmental
Performance Report, 2016). The EPI is calculated by aggregating 20
indicators covering two dimensions: environmental health (including air
quality, water and sanitation and health impacts) and ecosystem vitality
(including climate & energy, biodiversity & habitat, fisheries, forests,
agriculture and water resources).
There is perhaps no other example in the history of world development of
an economy growing so fast for so long with such limited results in
terms of broad based social and environmental progress. It is clear from
the above that economic growth is not synonymous with development and
that growth is but a means to development and not an end in itself.
This implies that India needs to change the nature of its growth and
transition to a green, fair and inclusive economy i.e. an economy that
results in improved human well-being and social equity, while
significantly reducing environmental risks and ecological scarcities (UNEP,
2011). More importantly, India needs to start making this transition
now. For several reasons, it cannot afford the 'grow now, pay later'
model adopted by other developing countries like China or Brazil (Green
Signals, 2015).
Firstly, India's population currently stands at over 1.3 billion people, 50 million of which are unemployed, 300 million of which are below the
poverty line and 600 million of which are those whose basic needs like
food, energy, housing, drinking water, sanitation, health care,
education and social security are not met (McKinsey, 2014). As the
number is expected to reach 1.5 billion in 2030 (UN Population
division), India needs to be able to provide job opportunities and
deliver a quality lifestyle to this generation without compromising the
ability of its future generations to have at least the same standard of
living. Secondly, a majority of India's population is still rural and
depends on natural resources like quality soil, water, non-timber forest
produce etc. for its livelihood. Thirdly, India is highly vulnerable to
climate change due to its dependence on the monsoon, large coastal
population, reliance on Himalayan glaciers for water security among
other reasons. It is projected that if India continues on a business as
usual scenario, its GDP will be around negative 9-13 percent by 2100 due
to the impacts of climate change (Carbon Disclosure Project). Finally,
India is increasingly facing environmentally caused public health
concerns from unprecedented industrial and vehicular pollution and
dumping of chemical waste and municipal sewage in rivers and
water-bodies. Diseases associated with outdoor and household air
pollution may have cost India as much as 8.5 per cent of its GDP in 2013
(World Bank).
India today has the perfect opportunity to make a transition towards
sustainability having recently made international commitments like
adopting the 2030 Agenda for Sustainable Development and ratifying the
Paris Climate Agreement.
The transition to this new economy has the chance to be based on current
knowledge rather than the historical assumptions such as growth can be
infinite or that it will always trickle down to those who need it the
most or that investing in the environment will undermine social
progress. Moreover, sustainable economic systems have the opportunity to
help the lives of the poor and most marginalised. It can bring new
sources of wealth and investment, alternative jobs and sectors, and
ultimately a more resilient economic system that is able to withstand
financial shocks and natural disasters better.
In order for this transition to effectively take place, our economy will
have to undergo a structural reform driven by new legislations, policies
and practices. This will require changes across five action areas each
of which interlink and reinforce each other (Green Economy Coalition).
The first is better management of our natural systems. People, business
and economies depend on nature for a stable climate, food, clean air and
water, energy and raw materials. Yet we have failed to reflect that
dependency in our economic activities and projections. It is in our
economic interest to ensure environmental stability, favourable climatic
conditions and the on-going provisions of environmental goods and
services. To do this requires stable investment, effective governance
and resource-efficient and ecologically sensitive sectors that work with
the natural world.
Simultaneously we need to rigorously start investing in people. Our
current inequalities and unemployment rates, particularly among the
young, wastes human capital and hinders innovation. A healthy and
educated workforce are the foundation of an inclusive economy.
In order to generate better social and environmental outcomes, we will
need to change the production systems that use people and nature as
inputs and impact them by their outputs by greening high impact sectors.
In the Indian context, these sectors are agriculture, manufacturing,
power, transport and tourism.
Changing the nature of production will require influencing financial
flows since financial markets are currently guided by short-term goals.
This can be achieved by longer-term policy directions which renew
confidence in green investment and through broader financial reform
packages.
Finally, none of this will be possible unless we redefine our
understanding of progress and start measuring what matters. By focusing
on improving only economic measures, we have lost sight of the end
outcomes we need to strive towards. We need to now align our indicators
and governance arrangements with what stakeholders actually want and on
what future prosperity depends.
The road to a green, fair and inclusive economy will not be easy and
treading it will require a strong collaboration between government,
businesses and civil society who recognise that our economies need to be
guided by different goals, sustained by different activities and deliver
different results.
■
Sonia Cyrus Patel
spatel@devalt.org
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