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Can India afford an economy obsessed with GDP growth rate?

Conventional economic analysts argue that achieving adequate human development indicators require a country’s economy has to grow continuously at an appreciable rate;  but, a densely populated and resource-constrained society such as ours cannot afford to ignore the implications of high energy and material consumption (which will be a consequence of high growth of the economy).

Shankar Sharma

The consequences of high GDP growth rate year after year need to be kept in mind w.r.t the true welfare needs of the communities in the country, which is possible only if the greenhouse gas (GHG) emissions and all the associated problems are targeted to be contained within the manageable limits. A question arises whether this ultimate objective can be compromised for any reason, since it involves the existential threat to the man kind in the form of Climate Change. Successive governments have proceeded with the assumption that India needs to sustain a high economic growth over next 20 years (and possibly beyond) to eradicate poverty and to meet its human development goals. It appears that the social, economic and environmental impacts associated with such high GDP growth on the vulnerable sections of our society were not considered objectively.

As a quick calculation of Compound Annual Growth Rate (CAGR) may indicate, whereas the economy can increase by 400% in 40 years at CAGR of 4%, it takes only 18 years to grow the economy by 400% at 10% CAGR. In this context it is essential to try to address the question as to how much energy / material consumption increase is considered acceptable from the Climate Change (CC) perspective?

It is a fact that 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; unsustainably increasing demand for natural resources such as land, water, minerals, timber etc.; acute pressure on the Government to divert agricultural/forest lands for other purposes; huge demand for energy; accelerated urban migration; clamor for more of airports, air lines, hotels, shopping malls, private vehicles, express highways etc.

Vast increase in each of these activities, while increasing the total GHG 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 air and water pollution along with huge issues of managing the solid, liquid and gaseous wastes. These consequences will result in depriving the weaker sections of the society even the access to natural resources, while driving the fragile environment to a point of no return. Does our society need such an eventuality? Is this what we want from Global Warming perspective?

Since the primary objective of high GDP growth centered policy is to create jobs, it is worth repeating what Tamil Nadu State Action Plan on Climate Change (TNSAPCC) has said about the importance of agriculture to TN’s economy. This statement becomes relevant from the perspective of overall welfare of our masses. Tamil Nadu State Action Plan on Climate Change (TNSAPCC) states: “Global development experience reveals that one percent growth in agriculture is at least two or three times more effective in reducing poverty than the type of same growth emanating from non-agricultural sector.”

The country as a whole, being traditionally an agrarian economy, should consider the role of agriculture in providing more employment keeping in proper perspective that good agricultural practices will lead to much reduced GHG emissions than the best set of industrial practices. The net effect associated with high GDP growth target will be that the total GHG emissions will increase by considerable margin, even if we adopt most energy efficient processes, and the reduced emission intensity of the state’s GDP is feasible.

The desirability of such high GDP growth rate scenario to our society needs to be questioned in the context that the increase in total GHG emissions will be closely associated with the increased pollution of air, land and water; and the increased denial of access to natural resources to the vulnerable sections of the society. Reduced area and density of forests, dammed rivers, polluted air, forced displacements which will all be the consequences of a frenetic 7 – 8% GDP growth are bound to impact the vulnerable sections of our society. Since the vulnerable sections of the society are also the most impacted lot due to climate change, the larger civil society has a crucial role to ensure that their legitimate interests are protected adequately.

Gross National Happiness
The phrase “Gross National Happiness” (GNH); was coined in 1972 by Bhutan’s fourth Dragon King, Jigme Singye Wangchuck. The phrase was coined as a signal of commitment to building an economy that would serve Bhutan’s culture based on Buddhist spiritual values instead of the western material development that was represented by gross national product (GNP). The GNH concept has inspired a modern political happiness movement. Through the contribution of several western and eastern scholars, economists and politicians, the concept evolved into a socioeconomic development model. In July 2011, the United Nations passed Resolution 65/309, that was adopted unanimously by the General Assembly in July 2011, placing “happiness” on the global development agenda. The four pillars of GNH philosophy are the promotion of sustainable development, preservation and promotion of cultural values, conservation of the natural environment, and establishment of good governance.

“The GNH concept evolved through the contribution of international teams of scholars and researchers to become a socioeconomic development framework. The GNH policy now serves as a unifying vision for Bhutan’s five-year planning process and all the derived planning documents that guide the economic and development plans of the country. Proposed policies in Bhutan must pass a GNH review based on a GNH impact statement that is similar in nature to the Environmental Impact Statement required for development in the U.S. Today, GNH has come to mean so many things to so many people but to me it signifies simply – Development with Values. Thus for my nation today GNH is the bridge between fundamental values of kindness, equality and humanity and the necessary pursuit of economic growth.’
Jigme Dorji Wangchuk

A quick look at the possible impact of sustained high GDP growth on the critical sectors of the Indian economy can reveal a disturbing trend. The transport sector will demand much higher consumption of energy such as diesel, petroleum and LNG. These products which already have about 80% import content can only increase with disastrous consequences on energy security. The pollution loading of vastly increased consumption of petroleum products, which has given rise to concerns in urban areas already, is likely to reach extremely unhealthy levels. Along with increased GHG emissions and much higher levels of suspended particulate matter, the pressure on the transportation infrastructure can become unmanageable. Increased use of private passenger vehicles, which is already a huge concern, will escalate to choke our roads and lungs.

Vastly increased industrial activities, as a consequence of high GDP growth rate, will put unbearable demand on land, fresh water, energy and other raw materials. Such a demand on land (such as in SEZs, coastal industrial corridors, large size coal power plants, nuclear power parks, IT&BT parks etc.) have already given rise to a lot of concerns to social and health scientists, and already has witnessed social upheavals as in Narmada valley, Singur in West Bengal, Niyamgiri Hills in Orissa etc.. Under such a scenario the industrial sector, which is already responsible for about 21% of GHG emissions, will contribute hugely to the increase in total GHG emissions of the state. Similarly, high GDP growth rate will lead to steep increase in demand for building activities in the form of factories, transportation infrastructure, offices, hotels, airports etc. which in turn will put huge demand for construction materials and energy. In this scenario can the increase in GHG emissions be contained adequately?

The most telling impact of frenetic economic growth of 8 – 9% over the next 20 years will be on forests, rivers and other natural resources, which in turn will lead to reduced capacity of nature’s carbon sinks. As against National Forest Policy target of 33% of forests & tree cover, the country / state has less than 20% of the same, whereas the forests in tropical countries are considered to be very important sinks of CO2. The demand for additional lands and minerals for the increased activities in all the above mentioned sectors will further reduce the forest & tree cover, which in turn will severely impact the availability of fresh water and on the nature’s ability to absorb GHGs. The impact of vastly reduced forest & tree cover on human health and on all aspects of our society is well known, and hence requires no detailed elaboration.

Whereas the increased economic activities associated with high GDP growth rate will certainly result in vastly increased GHG emissions, the same will also reduce the ability of forest & tree cover to absorb GHG emissions from the atmosphere. In this scenario it is anybody’s guess as to how the state’s net GHG emissions can be reduced to an acceptable level. The base line assumption (in Integrated Energy Policy of the erstwhile Planning Commission) that the country needs to sustain an economic growth of 8 – 9 % over next 20 years to eradicate poverty and to
meet its human development goals will lead to very many intractable problems for the society from social and environmental perspectives. Such a high growth rate has never been found necessary in developed economies, where even at the highest growth period they are reported to have registered only 3-4 % growth.

The so called “trickle down” benefits to vulnerable sections of our society through 8-9 % growth will be negligible as compared to the all round benefits associated with inclusive growth of a much reduced rate, say 3-4%, if we harness our natural resources responsibly and equitably. Hence the obsession with target GDP growth rate of 8-9 % should be considered against a paradigm shift in our developmental objective, which will give priority for inclusive growth aimed at sustainable and responsible use of natural resources.

There is a need to appreciate the fact that there is a limit to the nature’s ability to support human activities / desire. Such a demand on the nature must be carefully managed, which is not possible if we set a target of 8-9 % GDSP growth rate year after year for a huge population, which is growing every year.

A World Bank report of June 5, 2013 has highlighted how the environment has suffered in India consequent to past decade of rapid economic growth. The report with the title “Diagnostic Assessment of Select Environmental Challenges, Economic Growth and Environmental Sustainability: What Are the Tradeoffs?” has many revelations of critical importance to the future of our communities; provided our leaders take cognizance of it.

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About Shankar Sharma,

Shankar Sharma is a Power Policy Analyst based in Mysore. He writes regularly on energy, environment and climate change. His book, 'Integrated Power Policy', can be accessed here: http://mitramaadhyama.co.in/archives/2791. You can reach him at: shankar.sharma2005@gmail.com