India’s stellar economic performance during the past decade has brought immense benefits to its citizens. Employment opportunities have increased and millions have been allowed to emerge from poverty. But, rapid growth has been clouded by a degrading environment and a growing scarcity of natural resources. Today, India ranks 125th among 132 countries on all measurable environmental indicators, and dead last in terms of air pollution. In addition, more than half of the most polluted cities in the Group of Twenty (G-20) countries are in India.
As the population grows and urbanizes and consumption patterns change, pressure on the country’s natural resources—air, water, land and forests—will steadily increase. In fact, in the coming years, pressure on India’s environment, driven by both poverty and prosperity, is projected to become the highest in the world.
So, does growth—so essential for development—have to come at the price of worsened air quality and other environmental degradation? Fortunately, the country does not have to choose between growth and the environment. The good news is that there are a number of low-cost policy options that could significantly curtail environmental damage without compromising future growth.
For example, there is now enough evidence to show that coal beneficiation, or the washing of coal, is not only an inexpensive way to reduce its ash content but also improves a coal-fired power plant’s efficiency while cutting down significantly on operation and transport costs. Similarly, flue-gas desulfurization technology is a cost-effective way to take care of particulate pollution from thermal power plants while delivering huge health benefits to the people. Moreover, as has been seen in other countries, the introduction of new fuel standards in transportation, as well as the more stringent enforcement of environmental performance by industries can bring down air pollution sharply and efficiently.
Our new study, the first of its kind in India, shows that these policy options will cost the economy just 0.02% to 0.04% of average annual gross domestic product (GDP) growth. Compare this with the whopping cost of a deteriorating environment on the people’s health and productivity—at a staggering Rs.3.75 trillion each year ($80 billion)—or 5.7% of GDP.
Among these costs, outdoor air pollution exacts the highest toll (at 1.7% of GDP) mostly through an increase in cardiopulmonary diseases among the young and productive urban population. This is followed by indoor air pollution, at a cost 1.3% of GDP, which mostly affects the rural people.
The remaining costs stem from the depletion of the country’s natural resources and from diseases caused by poor water supply, sanitation and hygiene which largely affect children under five. In fact, almost one in four child deaths in the country can be attributed to some form of environmental degradation. Clearly, given these enormous costs to all segments of India’s population, grow now and clean up later is not an option for India. Moreover, climate change and the increasing frequency and intensity of extreme weather events are expected to further exacerbate these already serious public health problems.
In addition, the degradation of air, water, soils, forests, wetlands, grasslands, coral reefs, etc.—all vital for economic productivity—are causing real costs to the economy. Much of the ongoing loss of natural assets can be attributed to the lack of incentives and markets to provide compensation for the supply of essential environmental services, including hydrological services, carbon services and biodiversity. There is, however, a growing recognition of the importance of these resources in the public domain. While it is very difficult to put a monetary value on ecosystems and the services they provide, our study finds that equations change when this is done. Accordingly, we attempt to place an economic value on India’s unique biodiversity and ecosystems, calculating these at 3 to 5% of GDP by conservative estimates.
Since decisions taken today will lock the country into patterns of growth that will impact future generations, it is imperative to calculate green GDP by factoring in the environmental consequences of growth. The government of India has already set 2015 as the target to release green GDP data. And, the 12th Plan sets ambitious targets for reducing particulate emissions. The good news is that there are number of initiatives in planning or under way that look at cost-effective ways of reducing air pollution. They range from state-level emission trading schemes to improving the effectiveness of clean energy fund to specific measures targeting efficiency improvements in power plants or city transport systems. But in order to meet the 12th Plan’s ambitious targets, there is an urgent need for these efforts to be backed by a comprehensive regulatory framework, a clear implementation plan, as well as instruments and mechanisms to enforce it.
There is now enough evidence to show that environmental performance does not automatically improve with national income. Policy action and effective implementation will therefore be required to prevent and remedy obstacles to growth as well as to reduce the adverse impact upon the people from environmentally unsustainable practices.
Clearly, we cannot afford to delay. For, if we wait too long, it may be too expensive or too late to clean up. What’s worse, failure to act now could also constrain India’s long-term productivity and put a brake on the country’s future prospects for growth.
Muthukumara Mani is a senior environmental economist with the World Bank.
