Environmental Accounting in India
Environmental Accounting in India
Environmental Accounting in India
A Framework
March 2013
T his Report - on Green National Accounting for India - was commissioned by the
Government of India under the direction of the Prime Minister. I was approached
by Minister Jairam Ramesh, then at the Ministry of Environment and Forests, to
Chair an Expert Group he was in the process of assembling with a mandate to produce the
Report. The Expert Group was constituted on August 4, 2011. The Group met in New Delhi
on three occasions (23 August 2011, 16-17 April 2012, and 6-7 December 2012), but from
the beginning Members have maintained regular correspondence. The Report's form and
structure evolved as we discussed the underlying issues; indeed a number of the technical
appendices grew from a written response to a simple query, through many revisions and
expansions, into their final shape. And in one case a chapter was formed and included on
the basis of a Member's brief observations over a practical matter. In order to make the
Report self-contained, we have developed the theoretical arguments both informally and
by the aid of formal models.The text has been written in as non- technical a manner as is
possible without obfuscating the analysis. The technical arguments that accompany the
text are provided in the Appendices.It perhaps helped that Members of the Group have
known one another for some time; if not personally, certainly by reputation, but it is a
pleasure to record that our meetings and correspondences have invariably been conducted
with intellectual curiosity and zest, and in good humour.
For our second meeting we invited a number of relevant organizations to make presentations.
They included the Indian Council of Agricultural Research, the Forest Survey of India, the
Central Pollution Control Board, the Ministry of Earth Sciences, the Geological Survey
of India, the Indian Bureau of Mines, the Central Water Commission, the Botanical and
Zoological Survey of India, and the Social Statistics Division of CSO. In addition, Professor
Janakarajan and Dr. Manoj Panda made presentations in their personal capacity. The
Ministry of Environment and Forests also participated in all the meetings and the Group
had the benefit of their contribution. I am grateful to the officers and staff of the Central
Statistics Office, in particular Mr. S.K. Das, Smt. S. Jeyalakshmi, Mr. Ashish Kumar, Dr.
N. Eagambaram, Mr. James Mathew, Mr. S. Suresh Kumar, and P. Sai Manohar, who had
been associated with the work of this Report.
Throughout, our Group has had the benefit of guidance from Mr. V. Parameswaran, Deputy
Director General of the CSO. For nearly two years now, he and I have maintained a regular
and frequent correspondence (sometimes three-to-four e-mails a day) not only over the
shaping of our Report, but also on such practical matters as creating the Agenda for our
meetings. He agreed to prepare a chapter describing India's system of national accounts
(Chapter 3) against whose backdrop we were develop our recommendations, and he agreed
too to prepare the final set of recommendations (Chapter 6). This Report could not have
been prepared but for his engagement.
For me personally, involvement with the Report has been revelatory. I am an economic theorist
by training and inclination and have led a most sheltered life in academia. So, the ease and
warmth with which real experts in specialized fields distant from my own welcomed me into
their midst and advised me on matters in their subjects of specialization was something I had
not expected. The Report's theme is close to my own research engagement, so I was naturally
attracted to the task of Chairing the Expert Group, but it is the personal involvement among
experts in diverse disciplines, with widely differing experiences, that have been the most
memorable. For all that I am grateful.
Executive Summary
1
Here we do not distinguish between gross domestic product and gross national product, because the distinction
has no bearing on the points we wish to highlight here.
The Report also shows that the coin on the basis The Report shows that by "economic growth"
of which we should judge policy changes - such we should mean growth in wealth per capita,
as changes in taxes, trade, and the undertaking not growth in per capita GDP; and by
of investment projects - is also wealth. It is well "inclusive economic growth" we should mean
known of course that the criterion that ought "inclusive growth in wealth". It can easily be
ideally to be used to evaluate, say, an investment that a society enjoys growth in GDP per capita
project is the Present Discounted Value (PDV) and/or an improvement in its HDI even while
of the flow of social profits arising from it. experiencing a decline in its per capita wealth.
What is perhaps not commonly known is that Of course, the reverse can happen too. That
the PDV in question is the change in wealth said, the aim of a society should not be to
brought about by the project. That means the maximize the rate of growth of wealth per
PDV of the flow of social profits arising from capita, but rather to identify a desirable rate.4
an investment project is positive if and only if
the project gives rise to an increase in wealth. 1.3 The Idea of Investment
The Report argues that the pair of equivalence Wealth is a stock, whereas the rate of change in
("if and only if") relationships just mentioned wealth over time is a flow. Changes in wealth are
should serve as the conceptual foundation of brought about by investment. Wealth increases
national accounts and influence the way data if and only if aggregate net investment is
2
What we are calling “wealth” has been named “comprehensive wealth” by Arrow et al. (2012) and “inclusive wealth” by
UNU-IHDP/UNEP (2012).
3
For ease of exposition we drop the qualifier “corrected for the distribution of wealth” in what follows.
4
An early, incisive treatise on the idea of optimum economic development was Chakravarty (1969). Understandably, he
didn’t characterise that development in terms of wealth. The two equivalence relationships just mentioned in the text were
discovered many years later.
5
The term “gross capital formation” is even more restrictive. It doesn’t reflect the depreciation of reproducible
capital.
6
For reflections on the controversy over the use of shadow prices in project evaluation, see Little and Mirrlees (1991).
7
Freeman (2002) is the recognised treatise on the subject.
8
This is confirmed by Government of India Report (2012) on expanding the basis of national accounts in India.
In an optimally managed economy the two would cancel each other and wealth would remain unaffected.
9
10
An outline of an SEEA in an optimizing economy where defensive expenditure is undertaken was provided by Mäler
(1991).
Conceptual Foundations
Evaluating population policies would require a study of alternative forecasts of future numbers and their consequences.
11
13
See, for example, Vermeulen (2012) in a recent symposium on revealed preference theory in the Economic
Journal.
14
Southerton and Ulph (2013) is a trans-disciplinary collection of essays on consumption behaviour.
Layard (2005), Clark et al. (2008), Bok (2009), and Graham (2009) contain accounts of the various surveys on
15
happiness. See also the wide-ranging discussion in Stiglitz, Sen, and Fitoussi (2009).
Rawls (1972).
16
Carlsson and Johansson-Stenman (2012) is an excellent survey of the lessons behavioural economics has for environmental
18
policy.
19
Competitive consumption sustains an important form of “consumption externalities”. We study externalities
in their general form in Section 2.6.1.
20
See Dasgupta (1993) for the theory underlying conformism in reproductive behaviour, and Bongaarts and
Watkins (1996) and Jensen and Oster (2009) for empirical confirmation.
21
Moore (1903) is probably the most recognizable exponent of the view in recent centuries. He came very close
to reducing ethics to aesthetics.
22
The literature is gigantic. Rawls (1972) is the most prominent example.
23
For brevity we are ignoring social effects, which are discussed in Section 2.6.1 and Appendix 11.2.
24
The normative significance of national income has been much studied in the literature (Lindahl, 1933; Hicks,
1940; Samuelson, 1961; Mirrlees, 1969; Sen, 1976). Below we show that income misleads.
Placing herself at a date other than the date she is at is the sort of sympathetic thought-experiment common in
26
normative discourse.
27
See for example, Chakravarty (1969), Arrow and Kurz (1970), and Little and Mirrlees (1974). The non-negative number
δ is known as the “pure rate of time preference”. As mentioned in the text, we are deliberately not specifying the number
of dates following t that are to be included in the notion of intergenerational well-being.
28
The literature is large. Rawls (1972) is a most prominent example.
See also Jorgenson, Landefeld, and Nordhaus (2006) for wide ranging discussions on the framing of national
29
accounts.
31
Theirs is a four-way classification of ecosystem services: (i) provisioning services (food, fibre, fuel, fresh water); (ii)
regulating services (protection against natural hazards such as storms; the climate system); (iii) supporting services (nutrient
cycling, soil production); and (iv) cultural services (recreation, cultural landscapes, aesthetic or spiritual experiences).
Notice that cultural services and a variety of regulating services (such as disease regulation) contribute directly to human
well-being, whereas others (soil production) contribute indirectly (by providing the means of growing food crops). As this
Report has been commissioned because of the need to make national accounts “green”, we discuss natural capital more
fully in a separate section (Section 2.7) and in the Annexe. Bateman et al. (2011) provide a fine discussion of the valuation
of ecosystem services.
Sociologists speak of “symbolic capital” as well. See Bourdieu and Passeran (1990).
32
No doubt the purpose of corrupt practice is to enhance the market worth of assets owned by the practitioner.
33
34
On the role of trust in sustainable development, see Dasgupta (2011).
35
The same logic says that, other things being equal, an oil importing country would find its productive base shrinking as
the international price of oil rose over time.
Capital assets are by their nature durable goods. 2.4.2 The Primacy of Economic
Some are tangible (roads, wetlands), others Forecasts
are not (skills). Although assets depreciate As the example of the writing desk makes
(machines and equipment undergo wear and tear clear, an asset's shadow price depends not only
even when left unused; fisheries are destroyed on its current use, but also on its future use.
when over-harvested; and people have been So the price depends on the forecast of the
37
That calendar date can matter is another way of saying that certain features of an economy may change exogenously (e.g.,
international prices, knowledge produced by other countries for which payment doesn’t have to be made).
38
The procedure here is no different from the way we convert market prices from one currency into another.
39
Loosely speaking probability distributions over possibilities are said to be “objective” if there have been so many instances
in the past that the probability estimates are obtainable from frequency distributions (e.g., rainfall). The term “subjective”
is used for all other cases. The terms “risk” and “uncertainty” are often used to distinguish the two cases. There are now a
number of excellent texts on the subject. A classic is Raiffa (1968).
On sensitivity analysis and its importance in economic evaluation, see Dasgupta, Marglin, and Sen (1972).
40
The idea of option values is due to Weisbrod (1964), Arrow and Fisher (1974) and Henry (1974).
41
42
Kumar (2009) contains a recent attempt to estimate the option value of biodiversity.
43
Some authors refer to W as “inclusive wealth” (World Bank, 2006, 2011; UNEP/UNU-IHDP, 2012), others call it
“comprehensive wealth” (Arrow et al., 2012a). However, World Bank (2011) defines inclusive wealth differently. See
Appendix 4.5 for a review of their study of the wealth of nations.
44
The Proposition was proved by Hamilton and Clemens (1999) for an optimizing economy and Dasgupta and Maler
(2000) for arbitrary economies.
45
In an albeit very crude estimate, Arrow et al (2012a) found the wealth-output ratio in India in the late 1990s to be of
the order of 120 years!
See Dasgupta (2001). Formally, in place of the expression for V(t) in equation (3), we have
46
Arrow (1971) and Meade (1973) are excellent studies in the pure theory of externalities.
47
Pattanayak and Butry (2005) is an empirical study of the complementarities between forests and adjoining farms.
49
We stress this because the bulk of writings on shadow prices of environmental natural resources limit themselves to
50
Unidirectional and reciprocal externalities are not limited to the transnational sphere; small scale examples abound.
51
Pattanayak (2004) provides empirical estimates of the subsidy in a study of waatersheds in Indonesia. They range within
52
53
Aldy et al. (2010) presents a concise discussion of carbon mitigation options.
54
The classic on the question is Barrett (2003).
55
Arrow et al. (2012a) used this argument to estimate the losses suffered from global emissions by the countries in their
sample over the period 2000-2005.
The remarks here have been adapted from Arrow et al. (2007), which was a reply to Daly et al. (2007).
56
57
MEA (2005a-d), Balmford et al. (2011), and Bateman et al. (2011) contain excellent accounts of ecosystems viewed as
capital assets.
58
There are a few in other tropical countries. Ferraro et al. (2012) is an excellent survey of what has to date been unearthed
about the value of forest services.
Maler and Wyzga (1973) was an early study of ways to estimate the costs of environmental pollution.
59
60
A formal proof is provided in Appendix 7. An early version of the Proposition was proved by Solow (1974), Hartwick
(1977), and Dixit, Hammond, and Hoel (1980).
61
Maler (1991) is the fundamental paper on the subject.
62
We are assuming implicitly that the shadow price of the resource in the newly discovered deposit is not too different
from the resource’s shadow price in the known reserve. If the newly discovered deposit were of low quality, wealth could
decline under the circumstances just mentioned in the text.
63
Governments are known to go further and subsidize extraction costs.
For reviews, see S. Dasgupta et al. (2002), Dinda (2004), D.I. Stern (2004).
65
The observations below are taken from Arrow et al. (1995), which was republished, with comments by a number of
66
See Tomich et al. (2004), Tomich et al. (2004), MEA (2005a-d), and Palm et al. (2005) on those tensions.
67
68
For example, the discovery of effective ways to replace the piston by the steam turbine (i.e., converting from reciprocating
to rotary motion) was introduced into power plants and ships a little over 100 years ago. The innovation was an enormous
energy saver in engines.
69
But these shifts have not been without unintended consequences. Global climate change didn’t feature in economic
calculations until very recently.
70
Forests in England had begun to be denuded earlier, by Neolithic Britons and the Romans
71
The decay of Mayan civilization has been traced by some scholars to an overuse of agricultural land. Soil degradation
made Mayan populations more vulnerable to crop failure in times of low rainfall. Martin and Grube (2000) have offered
evidence that the collapse of a number of Mayan cities occurred in the remarkably-short interval AD 800-830 (see
also Yaeger and Hodell, 2008). The death of Easter Island has been the subject of much recent debate. Brander and
Taylor (1998) give a short historical account and construct a formal mechanism by which a seemingly sophisticated island
economy could collapse over a short period of time. In a Special Issue on “Critical Perspectives on Historical Collapse”,
The Proceedings of the National Academy of Sciences (2012, Vol. 109, No. 10, March 6) has published articles uncovering
reasons for the collapse of certain past societies.
In 2003 the journal, Environmental and Resource Economics (Vol.26, No.4 ) published a Symposium on the economics
72
Book length treatments of the subject are Chakravarty (1969), Arrow and Kurz (1970), Heal (1998),
74
We commented on this in Section 2.6.4 of the text when noting the large difference in the estimates in Stern (2006) and
75
Nordhaus (2008) of the global shadow price of carbon concentration in the atmosphere.
We begin by proving Propositions 1 and 2. As perturbation, the right hand side of equation
noted in the text, the Propositions are valid for (A4.3) can be expressed as
sustainability analysis covering short intervals
of time. The Propositions are then extended to ΔV(K(t),t) = iΣ[∂V(K(t),t)/∂Ki(t)]ΔΚi(t) +
cover discrete time intervals. Finally we show [∂V(K(t),t)/∂t]Δt. (A4.4)
that the list of capital assets is to an extent a Define r(t) as
matter of choice.
r(t) = ∂V(K(t),t)/∂t. (A4.5)
A4.1 Equivalence of Wealth and r(t) is the "shadow price of time", a term that
Well-Being could appear ludicrous, for it suggests that
For analytical convenience we assume time is a time is a capital asset. It isn't ludicrous though.
continuous variable. As previously Pi(t) is the If exogenous forces were a feature of the
shadow price of asset i at t (the date the social economy's RAM, intergenerational well-being
evaluator is conducting her study). K(t) is the would be an explicit function of time. In that
vector of capital assets. The population profile case we would regard time as an additional
is included in the list of assets. On the basis of capital asset, subsumed in the list of assets in
the forecaster's RAM intergenerational well- Section 2.4. But for vividness let us keep time
being is represented by the function V(K(t),t). separate from the other assets. Below (Section
Definition 3, which was formalized in Appendix A4.4) we confirm that an alternative would be
2 (equation (A2.3)), says to not regard time as an asset but subsume it
in the structure of shadow prices of quality-
Pi(t) = ∂V(K(t),t)/∂Ki(t). (A4.1)
adjusted measures of the more grounded
The economy's wealth (equation (5) of the assets, which are reproducible capital, human
text) is capital, and natural capital.
One way to interpret the equations is to regard Now define the variable X as
both A and K as state variables. In that view X = A*K. (A4.20)
of things the model has two assets: A and K.
Notice that equations (A4.11)-(A4.13) represent In interpreting X we may think of K as
an autonomous system. Intergenerational well- improving in quality at an exogenous rate. X is
being V is therefore a function of A and K: then quality-adjusted K.
In practice K(t) would be a combined aggregate numerical index of reproducible capital, human capital, and natural
77
capital.
See for example Romer (1996), Barro and Sal-i-Martin (2003), and Helpman (2004).
79
For the moment we are excluding oil and natural gas, which are at the limiting end of self-regenerative resources.
80
Many resources are mobile in their natural for host-population density, its geographical
habitat. They are often called fugitive. The term spread, social habits of the members of the
appears to have been coined for aquifers, and host population, and so forth. Empirical work
oil and natural-gas reserves, which reconstitute on the spread of infections, of course, requires
under pressure gradients. explicit spatial modelling and is so conducted
(Anderson and May, 1991).
Understandably, property rights to fugitive
resources are often weakly specified. Even In what follows we construct four canonical
when specified, they are all too frequently examples to illustrate the various ways mobile
unenforceable (e.g., aquifers). So, using those resources have been modelled. The dynamics
resources creates externalities. The question would be the basis on which shadow prices
arises as to how fugitive resources should would be estimated. Denote time by t. In what
be modelled. Sometimes it is suggested that follows t is taken to be continuous.
in view of their mobility, it may prove to be
a mistake to consider them as capital assets A6.1 Percolation of Oil, Natural-
in the conventional sense. River water flows Gas, and Ground Water
everywhere, so where is the stock that's Under the rule-of-capture, wild-caters in the
supposed to represent the asset we call a late 19th century were able to expropriate
"river"? more oil than had lain under the land they had
The correct move is to define stocks of mobile claimed as their private property. They were
resources in a location-specific manner. The able to do so because oil diffuses underground
"service" that can be obtained from those in response to pressure gradients caused by
stocks would then be identified also in a drilling. Slant drilling accentuates the diffusion.
location-specific way (Sections 2.6.3 and 2.6.4). Percolation theory offers the most effective
In some cases, though, scientists have ignored way to model sub-soil movements of liquids
the spatial character of mobile resources by and gases, but the simple model that follows
modelling their mobility in a "reduced-form" captures the essence of pressure gradients.
(Section 2.6.2). The classic equations governing Imagine two identical tanks filled with water
the spread of infectious diseases (reviewed in but connected at the bottom by a narrow tube.
Anderson and May, 1991, Ch. 6), for example, As water is extracted from the tanks by a pair
don't mention location; but instead postulate of "wild-caters", it flows from one to the other
the dynamics of a three-way division of host in response to any resulting pressure difference.
populations: susceptible, immune, and infected Because the tanks are identical, the volume of
members. The parameters of the model stand water in a tank can serve as an index of water
dK1(t)/dt = -C1(t) + ε[K2(t) - K1(t)], (A6.1a) In equation (A6.4), r and K* are parameters.
dK2(t)/dt = -C2(t) + ε[K1(t) - K2(t)]. (A6.1b) The idea underlying equations (A6.3)-(A6.4) is
that the fishery enjoys a constant rate of food
Equations (A6.1a-b) say that each wild-cater supply. If fish are not harvested (C = 0) and K
inflicts a "stock externality" on the other. It can were small to begin with (i.e., K2 is negligible
be shown (but it turns out not to be trivial to relative to K), growth would be exponential
show it!), that in the absence of cooperation, at rate r because the supply of food would to
both parties would drill at rates that are faster all intents and purposes be unlimited. But as
than they would agree to if they were able fish biomass grows, the constancy of the food
to reach collective agreement on the rate of supply begins to bite and constrains growth
extraction. (the negative quadratic term, K2 in equation
(A6.4) becomes large). Left un-harvested, K =
Under collective agreement the extractors K* is the unique stable equilibrium (Fig. 3). K*
would regard the tanks as a single reserve. The is therefore the fishery's carrying capacity. It is
aggregate stock of ground water, K(t), would simple to confirm that at K = K*/2 the fishery
obey the dynamical condition obtained by offers its maximum sustainable yield (MSY)
summing equations (A6.1a-b): and that the MSY is rK*/4.
dK(t)/dt = - C1(t) - C2(t), K(t) = K1(t)+K2(t). The r-K* model is the single-most important
(A6.2) ingredient in ecological theory. It appears
If the extractors were to choose C1(t) and C2(t) everywhere, under different interpretations, of
in an agreed-upon manner, there would be no course. We return to it in a different guise in
externalities. Enforcement of the agreement Appendix 7.
would eliminate the stock externality. In Because fish populations are mobile, sighting
Appendix 7 (Section A7.2) we show how to them is costly. Moreover, the smaller is the
estimate the shadow price of ground water population, the larger is the unit cost of
when there is free access to the reserve. harvesting the prey. We may then write the
unit harvest cost as e(K), where e (standing
A6.2 Fishery for "effort") is a declining function of K. Total
Let K denote the fish stock, measured in, say, harvest cost at t is then e(K(t))C(t). In short,
units of biomass. The natural regenerative rate, the mobility of fish is reflected in e(K).81
81
Dominant fishing companies have elaborate spatial models in the oceans, in which migratory routes are identified from
feeding and breeding grounds, oceanic currents, and so forth.
dS(u)/du = G(S) - R(u) = G(u) - dS(u). (A7.8) Suppose the rate of extraction d is large. Using
the economy's RAM, forecasters would conclude
Equations (A7.1)-(A7.8) describe a complete that unless d is reduced, the ecosystem will in
dynamical system with state variables, K, H, time cross the threshold and collapse. This is
and S. They enable the forecaster to identify valuable information for the social evaluator.
the economy's RAM. K(t), H(t), and S(t) define She will now wish to search for policies that
the "initial condition" for the forecaster (item would help to reduce extraction rates.
(ii) above). Shadow prices can be defined on
the basis of the economy's RAM (Appendices Can the economy survive ecological collapse?
1-2). If substitution possibilities in production
(equation (7.5)) between R and a combined
We may now compute NNP. Let well-being be index of K and H are limited when R is low
numeraire and let Q(t) be the shadow price of and there are bounds on the extent to which
consumption. Denote the shadow prices of K, technology can be expected to overcome
H, and S, respectively, by PK, PH, and PS. We future resource constraints, the economy would
define NNP as aggregate consumption plus face catastrophe. In such a world preserving
aggregate net investment. On using equation the ecosystem would be vital. The way to
(8) in the text, we know that in the economy save the ecosystem from collapsing would
under review be to introduce policy measures that target
NNP(t) = Q(t)C(t) + PK(t)dK(t)/dt + PH(t) extraction. If the rate of extraction is reduced
dH(t)/dt + PS(t)dS(t)/dt. (A7.9) sufficiently, the ecosystem wouldn't ever cross
S*. In Appendix 3 we saw how the shadow price
Equation (A7.9) yields Proposition 8 in the of S can be estimated if S* is not known with
text. certainty. When environmental scientists warn
growth economists not to ignore the potency
Now use equations (A7.1)-A7.8) in equation of Nature's non-linearities, it is the class of
(A7.9) to conclude that NNP can also be issues raised by equations (A7.1)-(A7.8) they
written as allude to.
NNP(t) = Q(t)Y(t) - βPH(t)H(t) - PS(t)[edS(t) -
G(t) + dS(t)]. (A7.10) A7.2 Common Pool Resources
Shadow prices of exhaustible resources when
Equation (A7.10) is probably the more familiar depletion rates are optimal have been much
form of NNP. For notice that Q(t)Y(t) is what studied.83 What is the structure of shadow
is often called final demand. Equation (A7.10) prices when an exhaustible resource is a
confirms that extractions costs (edPS(t)S(t)) "common pool"? We consider the case of a
should be deducted from final demand, as ground water basin.
It is a derived demand function, in as much as the water extracted is used for irrigation.
84
Condition (A7.20) expresses the magnitude of The value that ought to be attributed to ground
P* in terms of the parameters of the model. water is high (about 7 times extraction cost). As
Suppose, for example, that r = 0.02 per year, the date of exhaustion gets nearer, the shadow
S/R* = 100 years (i.e. at the open access rate price of ground water rises to its upper bound,
of extraction, the aquifer will be exhausted in 20.
The model is deterministic. Introducing uncertainty would yield nothing other than terms representing the social
85
86
We follow Arrow et al. (2012a), who extended the approach taken by Becker et al. (2005). The latter publication studied
the contribution that improvements in life expectancy make to income. Here we follow Arrow et al. (2012a) in tracking
the contribution that improvements in life expectancy make to wealth.
87
U′(HC) is the derivative of U with respect to the composite good HC.
88
The material in this Section is taken from Arrow et al. (2012b).
89
Notice that equation (A10.1) has the same additive form as the form for intergenerational well-being in equation (3) in
the text, with δ = 0.
90
Notice that the person faces a single budget constraint. If he survives to period 2, he consumes the C(2) he purchased
in period 1. Obviously he does not receive consumption in period 2 should he not make it to period 2.
The analysis can easily be extended to the case where h is a function of a (probably a declining function of a (at least
92
for large a!), but at the cost of additional notation. See Murphy and Topel (2006).
We gloss over differences between GDP and GNP because nothing is lost in our account by doing so.
93
• The travel cost method is frequently used to assess the demand for recreation when the
source of recreation is a publicly provided good such as a national park or beach. Based
on the costs that people are willing to incur to travel to a public amenity, the aggregate
value of the amenity can be identified.
• Hedonic methods estimate the value of an environmental good by looking at the market
prices of linked goods and services that are influenced by the environmental good. For
example, dirty ditches and sewerage water smell are a disamenity that often reduces the
property value of nearby homes. Since markets for homes exist, it is possible to identify
how much the market value of homes is affected by the presence of the disamenity.
From this information, a not too difficult next step is to estimate the costs (negative
value) associated with the environmental disamenity.
• The damage cost or production function approach is another method that is particularly
useful in developing countries. Here, the damage cost from an environmental change
to a final output is estimated by examining how the final good is affected. For example,
the external costs of shrimp farming can be valued by estimating the change in paddy
production in nearby fields as a result of increased soil salinity. Thus, the cost of the
externality is the salinity induced loss of profits from paddy crops.
• In some cases, a replacement cost approach is also used to value environmental changes.
In this approach, for example, the benefits of providing clean water are identified by
estimating the costs of filtering and cleaning the water to make it drinkable.
Stated Preference methods can be broadly classified into contingent valuation and choice
modeling.
• Contingent valuation refers to a survey based strategy where economic agents are
provided a hypothetical market-like scenario and asked to estimate their willingness to
pay for a change in a particular environmental good. Care is taken to make sure that
the scenario and the change proposed are well understood and to minimize ‘cheap talk’
or biased responses to the proposed hypothetical situation.
• Choice modeling is a tool used to identify the value of changing specific attributes of an
environmental good. It seeks to examine preferences for individual attributes of a good
or service. For example, choice modeling may be used to identify how much people
are willing to pay if the lodging infrastructure in a national park is improved versus if
wildlife sightings increase versus if the vistas or views of landscapes improve. This sort
of analyses would allow park managers to make investment decisions based on visitor
preferences.
Over the last two decades, our understanding of the usefulness and limitations of stated
preference methods of valuing environmental goods has grown tremendously. Choice
modeling, in particular, has become a widely used tool for private sector market research.
various methods to measure the value these the environmental change, soil conservation,
‘non-market’ goods. Broadly, non-market are empirically assessed by observing farmers’
valuation techniques can be categorized into actions and the results of these actions. Stated
revealed and stated preference methods. preference methods are more direct. They rely
Revealed preference methods provide on values that are expressed by consumers
methodologies for estimating environmental and producers in the context of hypothetical
values in the context of consumers and markets scenarios.
producers making consumption and production
choices in markets. For example, the value of Environmental valuation requires careful
soil erosion to a farmer can be estimated by examination of both physical changes and
identifying the contribution of soil erosion to human behavior. Good valuation depends
reduced farm outputs. Here the benefits of on how well we understand the change in
Tol finds that the mean marginal social damage from climate change to be $16/ton of carbon if he assumes a 3%
94
pure rate of time preference (4-5% social discount rate). The combined mean he obtains from the reviewed papers is
$51/ton of carbon if he assumes a 1% pure rate of time preference.
95
Indian official data refer of course to a well-understood classification of land: forests, land not available for cultivation
(including urban), net area sown, other uncultivated land excluding fallows and fallow land.
In the face of the huge demand from urban use, retaining land for agricultural or ecological
use is not going to be easy if valuation alone is used as the decision criteria. Underlying
asymmetries in the distribution of income, information and power of different stakeholders,
and capacity to pay, lead to high demand driven prices. While valuation of land for ecosystem
services may provide additional inputs, an understanding that there exist ‘ inviolate areas’,
whether for ecological or distributional justice reasons will have to be a critical component
of policy. Although ecologists and economists in the past have frequently employed a notion
of “scientific or economic rationality,” current environmental problem solving requires
them also to use “ethical rationality.”
Thus, we need laws to prevent conversion of ‘no-go’ or inviolate areas, thus conserving
supporting ecosystem services such as biodiversity and top soils. The loss of natural
capital, if we are not to do so, would be irreversible. More accurate, physical accounting is
a necessary precondition for this policy change to take place.
In order to incorporate changes in sub-soil There are many careful details that need to
wealth into national accounts, we need to a) have be worked out in estimating mineral wealth.
a good measurement of the quantity of India’s However, the accounting methods are well
mineral reserves; and, b) identify an accounting established and identified in the UNSEEA (see
method for estimating resource rents. Resource Chapters 7 and 8, SEEA 2003).
rents reflect the value of a unit of mineral
capital in the ground and are equal to the Conclusions
price of the mineral resource minus extraction Valuation of India’s environmental resources
costs. The net present value of resource rents in order to create environment-economic
multiplied by the quantity extracted until the accounts is possible. Changes in forest
stock is economically exhausted provides an resources, ground water, mineral resources
estimate of total mineral wealth.96 This value and some forms of land degradation can be
clearly depends on the discount rate used and measured and valued. SEEA (2003) provides
the quantity extracted each year.97 detailed recommendations for valuation, which
A country’s mineral wealth is never known with can be supplemented by some of the studies and
complete uncertainty. Reserves are generally methods discussed in this note. Any valuation
classified into four categories – proven, exercise, particularly if there are changes in
probable, possible and potential reserves. multiple ecosystem services, will necessarily be
Different countries treat these categories limited by data availability and methodological
differently when they account for their national challenges.
mineral wealth. Thus, one decision node for Valuation, in some cases, will require sample
India’s national accounts will be in agreeing surveys and testing of methods in diverse
on what category of reserves to consider as settings before embarking on national level
wealth. The two obvious candidates are proven accounting. In other cases, nationally available
reserves or proven plus probable reserves data can be used, but more thought needs to
(SEEA 2003). be given to how complimentary data can be
The next issue is estimation of resource rents. generated. As a first step, physical accounts of
Mineral prices are internationally determined key environmental and resource changes need
allowing any valuation exercise to use world to be established. Monetary accounts on a
prices. However, given volatility in prices limited subset of physical accounts can follow.
96
In rare cases, where markets for sub-soil deposits are available, it may be possible to obtain the market value of stocks.
In the absence of this, the value of stocks is estimated based on the NPV of flows from this stock (SEEA 2003)
97
See SEEA (2003) for details on how to incorporate discoveries and exploration.
98
Thus, the goods cover all possible items produced, as for example, agricultural crops, livestock and livestock products,
fish, forest products, mineral products, manufacturing of various consumer items for consumption, machinery, transport
equipments, defense equipments etc., construction of buildings, roads, dams, bridges, etc. The services, similarly, cover a
wide spectrum including medical and educational services, defence services, financial services, transport services, trading
services, domestic services, sanitary services, government services, etc.
99
While production of goods in the households are included in the production boundary of SNA, services produced in the
households are excluded due to problems of measurement and their unsuitability for monitoring the economic parameters
such as employment. For instance, services of house-wives are excluded.
100
Other forms of income such as old age pensions, education grants, unemployment benefits, gifts etc., cannot be regarded
as payments for current services to production. They are paid out of factor incomes and are called transfer incomes.
101
Broadly two types of fixed assets viz. construction and machinery & equipment are covered.
102
Technically, GCF is comprised: (a) gross fixed capital formation (GFCF), (b) consumption of fixed capital (CFC), (c)
changes in inventories (in India this is referred to as change in stocks) and (d) acquisition less disposal of valuables.
103
The expenditure on final goods and services may be purely for consumption purposes like consumption of food,
clothing, shelter, services etc., or for capital formation such as addition to buildings, plant, machinery, transport equipment,
etc. Some goods may not be immediately sold and may be kept aside as stocks. These goods which are added to stocks are
also accounted for as final expenditure. Goods and services are also used for exports.
104
The resources side of capital accounts show savings and the user side, the GFCF, Change in Inventories, and Capital
transfers. The balancing item in both capital and financial accounts is net lending/net borrowing.
105
Produced assets are further sub-divided into three types: (i) fixed assets, (ii) inventories and (iii) valuables. Fixed assets
consist of (a) tangible or (b) intangible assets that are used repeatedly in production for more than one year. Valuables are
works of art, precious stones and metals, jewelry, etc. which are not used in production or consumption. Their economic
value lies in the expectation that their price will increase.
106
Natural non-produced assets also include certain intangible assets such as patented entities, leases or other transferable
contract, purchased goodwill, etc.
107
With the gradual improvements in the availability of basic data, national income estimates were further revised and
published in 1967 by taking 1960-61 as the new base. Simultaneously, related aggregates such as ‘capital formation’ and
‘saving’ for the years from 1960-61 were published in 1969. Subsequently, there have been several revisions of the national
income series (with base years 1970-71, 1980-81, 1993-94 and 1999-2000) based on substantial improvements in the data
base and use of the revised SNA 1993 guidelines.
108
Base years are important for measuring the volumes of domestic product. The base year for India’s national accounts is
changed once in five years to capture structural changes that take place in the economy.
109
The series of national account aggregates revised in January, 2010 with base year 2004-05 took into account the following
three objectives: i) Revision of a base year to a more recent year for meaningful analysis of the structural changes in the
economy. ii) Complete review of the exiting data base and methodology employed in the estimations of various macro-
economic aggregates including choice of the alternative data bases on individual subjects, and, iii) Implementation of the
recommendations of SNA 1993 as well as SNA 2008 to the extent feasible.
The basic unit for measuring economic • cross-classification of output and value
activities and compiling national accounts is the added by industry;
‘institution’. India’s National Accounts (INA)
include three major institutional sectors, i.e. • cross-classification of value added by
the public or general government sector and industry and institutions;
public enterprises, households/un-organized
• classification of the functions of the
sector and NPISHs, and the private corporate
government;
sector (see Appendix 3 for definitions and the
correspondence between INA and the SNA). • classification of individual consumption
The ‘Rest of the world’ is also an institutional according to purpose.
sector which is shown as part of current and
accumulation accounts. The current accounts result in the aggregates
such as GVA (gross value added), balance of
India’s national accounts build the entire primary income (national income), disposable
sequence of accounts for the total economy, income, and finally, the savings of the nation.
but the accounts are not as complete for As noted, the accumulation accounts comprise
specific institutional sectors. Given available capital and the financial accounts. The capital
data, India constructs the following accounts account considers savings as resources of
and aggregates: the nation used for capital formation. The
difference between savings and capital
• for the total economy, the sequence of
formation (further adjusted for capital transfers)
accounts (current accounts, accumulation
is the net borrowing/lending of the nation. We
accounts including only the capital and financial
further note that current accounts do not give
accounts, and the rest of the world account);
rise to the full expenditure measure of GDP,
• for the total economy, the social accounting but only to one component of the GDP viz.
matrix which depicts all accounts in a single the consumption expenditure. The other two
matrix; components of GDP expenditure (GCF and net
exports) are externally compiled and included
Two accounts viz. ‘Other changes in volume assets account’ and ‘Revaluation account’ along with ‘Balance Sheet’ are
110
111
While the production approach of GDP is treated as a firmer estimate, any difference between the GDP measured by
the production approach and the expenditure approach is shown as statistical discrepancy in the GDP estimates through
the expenditure approach.
112
Production activities in the National Accounts of India and the SAM are classified according to the National Industrial
Classification (NIC), which is adapted to the International Standard Industrial Classification (ISIC). These activities
comprise: (i) agriculture, forestry & fishing, (ii) mining & quarrying, (iii) manufacturing, (iv) electricity, gas & water
supply, (v) construction and (vi) trade, hotels, transport & business services, and, (vii) community, social & personal
services.
in natural stocks; however, CFC, the measure completely excluded. Also, changes in stock of
of depreciation, is currently not calculated for ground water are currently un-accounted for.
non-produced assets such as land, mineral and
other deposits. Furthermore, GCF, the measure Another anomalous property of GDP is that
of changes in capital, does not include natural it will increase even when the quality of the
changes or improvements to non-reproducible environment is reduced by pollution. This
tangible assets such as land and mineral is because it both ignores non-monetized
deposits and natural growth of standing timber degradation of environmental quality and
or crops. includes monetized social costs associated with
attempts to improve quality. For example, an
GDP also under-estimates the value of natural increase in the consumption of potentially
resources. It does so even of those resources health-threatening goods such as alcohol,
whose use is monetized. In the forestry cigarettes and fatty foods will appear as an
sector, for example, while timber and NTFP increase in GDP, although they may decrease
use contribute to GDP, there is significant individuals’ welfare and impose a burden
under-estimation of NTFP quantities and on the national health budget. Effects in air
royalties may not reflect their true value. Non- and water quality on health are ignored or
monetized environmental goods and services included as consumption expenditure when
are not reflected in the national accounts. The they lead to the purchase of medical services.
contribution of other forest services such as GDP also increases when expenditures are
carbon or hydrological services, for example, is made on pollution abatement. This is another
The environmental aspects relating to the sectors for which national accounts are compiled mainly pertain to economic
113
activities involving use of natural resources that result in output which eventually lead to wastes and omissions and
depletion of natural resources and natural assets. Presently, no environmental factors are accounted for under national
accounts in terms of their use in the intermediate consumption or use of these natural resources as capital equipment, as
core national accounts according to SNA do not consider these under production activities
Litter
114
Environmental stocks and flows are considered in a holistic way. The environment from stock perspective includes all
living and non-living components that comprise the bio-physical environment, encompassing all types of natural resources
and the ecosystems within which they are located, whereas the environment from flow perspective is seen as the source of
all natural inputs to the economy including natural resource inputs like minerals, timber, fish, water, etc and other natural
inputs absorbed by the economy such as energy from solar and wind sources and the air used in combustion processes.
liabilities of the institution. The SEEA Central collected in controlled landfill sites). We note
Framework records physical flows of natural that the definition of products aligns to the
inputs, products and residuals. The flows from SNA definition of products, i.e., goods and
the environment to the economy are recorded services created through a production process
as natural inputs (e.g. flows of minerals, timber, and with economic value. Also the measurement
fish, water). Flows within the economy are boundary for physical and monetary flows
recorded as product flows (including additions aligns to the economic territory of a country,
to the stock of fixed assets) and flows from the as defined in SNA.
economy to the environment are recorded as
residuals (e.g. solid waste, air emissions, return Stocks: Environmental assets are defined as
flows of water). Notably, many residuals also the naturally occurring living and non-living
remain within the economy (e.g. solid waste components of the Earth, together comprising
The SEEA, in its stock accounts, does not consider the non-material benefits from the indirect use of environmental assets
115
(for example, benefits from environmental services such as water purification, storage of carbon, and flood mitigation).
Also coverage of individual assets does not extend to the individual elements that are embodied in the various natural and
biological resources listed above. For example, the various soil nutrients are not explicitly considered as individual assets.
116
For example, the recording of production of energy (through the incineration of waste) and the abstraction of water by
an establishment for own intermediate consumption is to be done under SEEA. Similarly in the functional accounts of the
SEEA Central Framework, recording of all production of environmental goods and services by an establishment (both
for environmental protection and resource management depending on the scope of the account) for own intermediate
consumption is to be done. The SEEA Central Framework also encourages the recording of own account production and
final consumption by households (e.g. in relation to the abstraction or the production of energy). For such household own-
account production, the production boundary used is the same as that described in the SNA. In all cases of own-account
and intra-establishment production recorded in the SEEA Central Framework, the valuation of flows is consistent with
the SNA valuation of own-account and ancillary production.
117
This variation is particularly applicable in recording physical flows associated with the processing of raw materials (e.g.
oil refining) where the physical flows may be largely invariant to the nature of the contractual relationships that are the
focus of recording of monetary flows in the SNA and the Balance of Payments. Flows between the economy and the
environment are determined by whether they cross the production boundary.
(iii) A sequence of economic accounts that The strength of the Central Framework comes
highlights depletion adjusted economic from consistently applying definitions and
aggregates; and classifications for stocks, flows and economic
units across different types of environmental
(iv) Functional accounts which record assets and different environmental themes (e.g.
transactions and other information across water and energy). Further strength
about economic activities undertaken for comes from different classifications being
environmental purposes. consistently applied in physical and monetary
Physical Supply and Use Tables (PSUTs) are terms and because the same definitions
used to assess how an economy supplies, and classifications are used in the SNA and
uses and releases energy, water and materials economic statistics.
and examine changes in production and Implementation of the SEEA does not require
consumption patterns over time. The Monetary compilation of every table and account for
Tables record flows of products in an economy all environmental assets or environmental
between different economic units in monetary themes. Rather it can be implemented in a
terms. Many of the flows of products recorded modular way taking into account those aspects
relate to the use of natural inputs from the of the environment of a country that are most
environment (for example, the manufacture of important.
wood products) or to expenditures associated
with the environment (example, abatement
or defensive expenditures). Separate Asset
Tables record the opening and closing stock of
environmental assets and the different types of
changes in the stock over an accounting period.
This information can be used to assist in the
management of environmental assets and
provide broader estimates changes in wealth.
118
In the compilation of supply and use tables in both physical and monetary terms, an important factor is the use of
consistent classifications for the main economic units and products. Industries are consistently classified using the
International Standard Industry classification of All Economic Activities (ISIC), products are classified using the Central
Product Classification (CPC), and the determination of whether particular economic units are within a particular national
economy is based on the concept of residence. The ISIC and the CPC are not only used in supply and use tables. They
are also used in the other accounts and tables to classify industries and products. Other classifications, such as the Standard
International Energy product Classification (SIEC), may also be used in specific situations.
119
A Framework for Development of Environment Statistics (FDES) following the UNFDES was developed by the
Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation (MOSPI) in early 1990s and the
first issue of Compendium of Environment Statistics was released in 1997.
SUPPLY TABLE
Rest of
Industries Households Accumulation Environment Totals
the World
Flows Total supply
Natural
from the of natural
inputs
environment inputs
Total supply
Products Output Imports
of products
Residuals
Residuals from
Residuals generated by
scrapping and Total supply
Residuals generated by household
demolition of of residuals
industry final
produced assets
consumption
USE TABLE
Rest of
Industries Households Accumulation Environment Totals
the World
Natural Extraction of Total use of
inputs natural inputs natural inputs
Household
Intermediate Gross Capital Total use of
products Final Exports
consumption Formation products
Consumption
Collection Accumulation
Residual flows
& treatment of waste in Total use of
Residuals direct to
of waste and controlled residuals
environment
other residuals landfill sites
Rest of
Industries Households Government Accumulation the Total
world
SUPPLY TABLE
Total
Products Output * * * Imports
supply
USE TABLE
Household Government Gross capital
Intermediate Final Final Formation
Products Exports Total use
consumption Consumption Consumption (incl.changes
expenditure expenditure In inventories)
Value added
SUPPLY TABLE
Products
USE TABLE
Total
Gross Acquisition Total
Total Household Total Total Final Changes Uses at
fixed less Gross Total
Industries Intermediate Consumption General Consumption in Goods Services Pur-
Capital Disposal of Capital Exports
Consumption Expenditures Government Expenditures Inventory chasers
Formation Valuables Formation
Prices
Products
Value added
T
he conceptual framework developed in Therefore, this chapter takes the SNA as its
Chapter 2 lays out the conditions for starting point. It explicitly recognises that the
sustainability under the assumption process of extension needs to be informed by
that information is not a serious constraint for three broad considerations:
evaluating and aggregating the diverse elements
(a) The extension does not violate the internal
that compose an economy. In making the
consistency of the SNA.
framework operational, the effective limiting
factor is in fact the availability of information (b) It progressively reflects a better
– particularly reliable and internally consistent understanding of the economy.
data. There are no doubt important
methodological issues which arise in the full (c) It is based on data that either exists or can be
implementation of the conceptual framework, generated with a reasonable degree of accuracy.
but these are secondary to the data issues. The
4.1.1 Measuring ‘Inclusive Wealth’
purpose of this chapter is to describe a step-
by-step process for generating the appropriate The key condition for assessing the sustainability
data for eventual realisation of the objective. of a particular growth path is encapsulated in
Proposition 2 of Chapter 2, which states:
Although all economic systems produce data
of varying reliability, and for a wide variety of “An economy’s development is sustainable
purposes, the only data set which currently over any brief period of time if and only if its
meets the minimum standards of internal wealth increases over the interval.”
consistency is the National Income Accounts
produced by most countries using the United In the proposition, ‘wealth’ is of course defined
Nations System of National Accounts (SNA). in its most inclusive sense. Nevertheless, this
The SNA provides the organising principles proposition is extremely attractive in that it
by which data from diverse sources can be appears to demand the least violence to the SNA
compiled to yield a consistent set of accounts. as it exists today. It may be recalled, inclusive
Thus, whatever the limitations of the SNA, wealth has within its ambit all produced (or
and there are many, it is at present the best that reproducible) capital, natural capital and
is available. More importantly, the organising human capital. The SNA already provides for
principles of the SNA provide a useful template all produced and a large component of natural
for the considerations that need to be taken capital within its asset boundary.
into account in the process of evolving a more
The balance sheet of the nation as provided
complete description of the economy than the
Environmental Accounting:
Illustrations
C hapter 2 discusses how we derive our 2001) and Gundimeda et al (2005, 2006, 2007).
well-being from different assets and the However, where feasible and possible the
changes in wealth (defined as the social estimates have taken into consideration latest
worth of any economy’s array of capital assets) available data.
as the prime object of interest to understand
the sustainability analysis. The proposition 5.1 Framework for analyzing
2 postulates “An economy's development is changes in wealth
sustainable over a period of time if and only We suggest evaluating the changes in natural
if over the period its wealth increases”. In this wealth using the format suggested in Table 1
part of the report we illustrate the feasibility of for the selected assets under consideration in
examining changes in wealth and integrating physical terms. The opening stock and closing
this into the national accounts for selected set stocks are the economically exploitable quantity
of assets: land, forests and minerals. We use of reserves or stocks available at the beginning
the theoretical construct discussed in chapter 2 and end of the accounting period. Changes in
to develop the wealth accounts and explore the quantity are brought about by direct economic
feasibility of the development of supply, use use/exploitation of the asset, including
and asset accounts to ensure consistency with the extraction of minerals, logging, water
the existing national accounts. The chapter abstraction etc. The term depletion measures
is structured as follows: In section 5.2, we the exploitation of the resource beyond long-
discuss the framework to analyze the changes term sustainable levels or yields (the quantity
in selected assets. Section 5.3 links with the exploited above the accumulation of the asset).
physical supply use tables to make it more Changes in quality of the resources affect
compatible with the existing national accounts the productivity and economic value. As the
in India. In section 5.4, we discuss the data quality changes are difficult to incorporate into
availability from different agencies in India. physical quantitative asset accounts, they are
Our objective in this report is not to develop shown separately below the closing stocks for
accounts using the latest values but use completeness. Other accumulation refers to
the existing studies as a sort of illustration changes in assets due to economic decisions
to discuss the framework, methodology, or interest and other volume changes are
valuation techniques, and then the feasibility the changes due to non-economic causes or
of integration into supply use tables. The natural events or disasters. They therefore do
estimates in this chapter are based on earlier not affect value added and income-generation,
work carried out by Gundimeda (1998, 2000, but are important elements in the assessment
of the availability of natural resources.
The specific accounting categories will slightly other accumulation. The losses of land due
vary. Below we discuss and compile the physical to natural disasters (like Tsunamis, wars, land
asset accounts for each resource. submergence due to permanent flooding etc)
are recorded in other volume changes. This
5.2. Land and soil accounts category includes also changes in land use
Opening and closing stocks consist of the and transfers of non-economic land from the
land area over which ownership rights are environment into the economy for purposes of
enforced, including land underlying buildings economic land use (cultivation, construction
and works, agricultural land, forest and other and so forth). The economic return to land in
wooded land, recreational land, and associated many cases depends on the quality of topsoil.
surface water, and other open land and areas of Under the land accounts one can consider
artificial water bodies. Land area can increased the degradation of land due to soil erosion,
through land reclamation, which is treated as deforestation, industrial development, natural
Table 2 gives the asset accounts for land based 6. Cultivable wasteland includes land available
on the nine-fold classification. The reporting for cultivation, whether not taken up for
area is classified into the following nine cultivation or taken up for cultivation once
categories: but not cultivated during the current year
and the last five years or more in succession
1. Forests include all lands classed as forest for one reason or other. Such lands may be
under any legal enactment dealing with either fallow or covered with shrubs and
forests or administered as forests, whether jungles, which are not put to any use. They
state-owned or private, and whether may be assessed or unassessed and may
wooded or maintained as potential forest lie in isolated blocks or within cultivated
land. The crops raised in forest and grazing holdings. Land once cultivated but not
lands or areas open for grazing within the cultivated for five years in succession
forests should remain included under the should also be included in this category at
forest area. the end of the five years.
2. Area under non-agricultural Uses: This 7. Fallow lands other than current fallows:
includes all lands occupied by buildings, This includes all lands, which were taken
roads and railways or under water, e.g. up for cultivation but are temporarily out
rivers and canals and other lands put to use of cultivation for a period of not less than
other than agriculture. one year and not more than five years.
3. Barren and un-cultivable Land: The category 8. Current Fallows represent cropped area,
includes all barren and uncultivable land which are kept fallow during the current
like mountains, deserts etc. Land, which year. For example, if any seeding area is
cannot be brought under cultivation except not cropped against the same year it may
at an exorbitant cost, should be classed as be treated as current fallow.
uncultivable whether such land is in isolated
blocks or within cultivated holdings. 9. Net area Sown represents the total area
sown with crops and orchards. Area sown
4. Permanent pastures and other grazing more than once in the same year is counted
Lands: They include all grazing lands only once.
whether they are permanent pastures and
meadows or not. Village common grazing The physical accounts for agricultural and
land is included under this head. pastoral lands include items such as opening
and closing stocks, other accumulation, and
5. Land under miscellaneous tree crops, etc.: other volume changes (Table 2). Opening
This category includes all cultivable land, and closing stocks refer to the quantity of
not included in ‘Net area sown’, but put
land (area in hectares) at the beginning and category, which simply pertains to the changes
end of the accounting period. The land area in the quantity of land (additions or reductions
under agricultural and pastoral lands can be in areas devoted to specific use) caused by
increased (artificially) for economic reasons economic decisions. Included in this category
by means of land reclamation (from the sea or are changes in land use and/or transfer of
river beds). Increase or decrease in the quantity non-economic land from the environment to
of land comes under the other accumulation the economy for production purposes and
Open forests include all land with a forest cover of trees with a canopy density between 10 to 40 percent. Dense or
120
closed forests include all lands with a forest cover of trees with a canopy density over 40 percent.
121
Unrecorded production refers to extraction of timber without proper records, illegally and detected theft.
122
Due to ban on clear felling this assumption may need to be revised. It is recorded that in some states like Rajasthan the
logging figure is as high as 2.5 times of the recorded production.
123
The figure is based on the information provided by the state forest department of Maharashtra (visited on May 28th
1997)
124
We assumed that forest encroachments and shifting cultivation usually happen on the periphery of open forests.
Therefore, the growing stock in open forests needs to be used for calculations.
125
The assumption was made, as the information on volume of stock growing in afforested area is not available.
126
Because of frequent fires and heavy grazing only 18.3% of the total forest, area has regeneration potential of important
species (FSI, 1995a).
127
Only the forest area that is prone to frequent fires is considered as affected by fire annually in this study.
128
During the period 1947-72 the forests were classified as deciduous and broad-leaved forests. The area, volume of
growing stock and volume of timber lost because of pests and diseases was available for that period. From this we
computed the proportion of timber (volume of timber affected/total growing stock) affected annually and used the same
proportion for the latest year.
Source: Opening and closing stock of assets are based on Indian Mineral Year Book, 2011 and previous years. Data on
extraction has been taken from CSO for the respective years. For copper, data is based on Copper Market survey report
(2011) published by IBM. The rest are derived.
and speculative) and economic feasibility of classification and considered two categories:
extraction (economic, marginally-economic, recoverable resources and in-situ resources.
sub-economic). If a mineral resource is Reserves include proved, probable and possible
both known and economically profitable to corresponding to the measured, indicated
exploit with existing technology and price it inferred classification of the McKelvey Box.
is categorized as ‘reserve’. This is the most Resources include prospective and prognostic
commonly used measure for the stock of reserves corresponding to the hypothetical and
subsoil assets. India, since 1981 and prior speculative classification of the McKelvey box.
to 2003 has followed a modified McKelvey The parameters are also very few and, largely,
Ideally, this net price ideally would be the This approach is referred to as the ‘simple
Hotelling rent accruing to the owner of the present value (PV) method’, where N declines
resource, in which case the expected rate of in each period as the resource is exhausted
growth of the unit rent would be equal to the (assuming no discoveries).
discount rate. The main problem with this A fifth approach has been proposed by Vincent
approach is that the marginal extraction is (1997). He assumed an iso-elastic extraction
fixed and for optimality, the total rent approach cost function with increasing marginal costs
required a rising price path to hold. defined by
The second variation, marginal rent (or
current scarcity rent) proposed by Hartwick
and Hageman (1993), states that under the
assumption of constant resource prices and
increasing marginal extraction costs, the user Where N is defined to be reserves-to-
cost is given by production ratio
Source: Timber, fuel wood, ntfps based on National account statistics from MOSPI
Carbon, recreation, genetic materials from secondary sources (mentioned in the text)
Value of minerals based on IBM data and net price is derived after deducting the costs based on earlier study (mentioned
in the text)
Loss in forest wealth: computed
not consistent. The latest data available is for the year 2011
Data on extraction Data is available with CSO and also IBM for various years
IBM publishes the information on quantity and value of minerals
Price extracted from which the prices can be computed. Export and
import prices are also available from the export statistics.
Implementing Environmental
Accounting in India
Integrated Research and Action for Development Methodology developed for air pollution abatement
(IREDe), Delhi costs, and water pollution status.
Did economic valuation of forests and indirect
benefits from forests.
Worked out environmentally adjusted SDP.
Physical accounting for land, forest land, timber and
carbon.
Monetary accounting for forests and water.
Environmental Accounting of Land and Water in
Tamil Nadu Valuation of stock of assets in respect of land and
estimation of value of land degradation.
Madras School of Economics (MSE), Chennai
Asset accounts for water and water quality
accounting.
Accounting for interaction between the economy
and the environment in the conventional accounts.
PSUTs for water.
Water related indicators based on primary survey.
NRA for Air and Water Sectors in West Bengal
Marginal/Average abatement costs and tax rates for
Jadavpur University, Kolkata water.
Monetary valuation for water based on damage cost
method.
Physical and Monetary accounting of air.
1. Abramovitz, M. (1986), "Catching Up, Forging Ahead, and Falling Behind," Journal of
Economic History, 56, 385-406.
2. Acemoglu, D. and Robinson (2006), Economic Origins of Dictatorship and Democracy (Cambridge.
MA: Cambridge University Press).
3. Adelman, I. and C.T. Morris (1965), "A Factor Analysis of the Interrelationship between
Social and Political Variables and per Capita Gross National Product," Quarterly Journal of
Economics, 79, 555-78.
4. Adelman, I. and C.T. Morris (1967), Society, Politics and Economic Development (Baltimore,
MD: Johns Hopkins University Press).
5. Adhikari, Bhim (2005). Poverty, Property Rights and Collective Action: Understanding
the distributive aspects of common property resource management. Environment and
Development Economics 10:7-31.
6. Aldy, J.E., A.J. Krupnick, R.G. Newell, J.W.H. Parry, and W.A. Pizer (2010), "Designing
Climate Mitigation Policy," Journal of Economic Literature, 48(4), 903-934.
7. Anderson, R.M. and R.M. May (1991), Infectious Diseases of Humans: Dynamics and Control
(Oxford: Oxford University Press).
8. Arrow, K.J. (1965), Aspects of the Theory of Risk-Bearing (Helsinki: Yrjö Jahnssonin säätiö).
9. Arrow, K.J. (1971), "Political and Economic Evaluation of Social Effects of Externalities,"
in M. Intriligator, ed., Frontiers of Quantitative Economics, Vol. 1 (Amsterdam: North Holland).
10. Arrow, K.J. (2000), "Observations on Social Capital," in P. Dasgupta and I. Serageldin, eds.,
Social Capital: A Multifaceted Perspective (Washington, DC: World Bank).
11. Arrow, K.J. and A. Fisher (1974), "Preservation, Uncertainty and Irreversibility," Quarterly
Journal of Economics, 88, 312-19.
12. Arrow, K.J. and M. Kurz (1970), Public Investment, the Rate of Return and Optimal Fiscal Policy
(Baltimore: Johns Hopkins University Press).
13. Arrow, K.J. and P.S. Dasgupta (2009), "Conspicuous Consumption, Inconspicuous
Leisure," Economic Journal, 2009, 119 (541), F497-F516.
14. Arrow, K.J., B. Bolin, R. Costanza, P. Dasgupta, C. Folke, C.S. Holling, B.-O. Jansson, S.
Levin, K.-G. Mäler, C. Perrings, and D. Pimentel) (1995), "Economic Growth, Carrying
Capacity, and the Environment," Science, 268(5210).
15. Arrow, K.J., G. Daily, P. Dasgupta, P.R. Ehrlich, L. Goulder, G.M. Heal, S. Levin, K.-G.
Mäler, S. Schneider, D.A. Starrett, and B. Walker (2007), "Consumption, Investment, and
Future Well-Being: Reply to Daly et al.," Conservation Biology, 21(5), 1363-1365.
16. Arrow, K.J., P. Dasgupta, and K.-G. Mäler (2003), "The Genuine Savings Criterion and the
An ‘Expert Group on Green National Accounting for India’ has been constituted
on 4th August, 2011 as per the directions of Hon’ble Prime Minister of India to develop a
framework for ‘Green National Accounts’ and to prepare a roadmap for implementation
of the same. The first meeting of the Expert Group was held on 23rd August, 2011 under
the Chairmanship of Prof. Sir Partha Dasgupta, Professor Emeritus of Economics,
University of Cambridge, United Kingdom at National Institute of Public Finance and
Policy (NIPFP), 18/2, Satsang Vihar Marg, Special Institutional Area, New Delhi at
10.30 AM. The list of participants is enclosed.
Dr. Partha Dasgupta, the Chairman of the Expert Group, in his address narrated
the distinction between the state of the economy and the need for valuation of the
economy. He explained two types of evaluation techniques. The first kind of evaluation is
based on the notion of Sustainable Development and tries to gauge whether the economy
is going in the right direction. The second type of evaluation is based on Cost-Benefit
Analysis and tries to bring out wealth of the economy through some measurements. The
measurement of sustainable development looks into the changes in stocks, net
investments, valuation of stocks, valuation of amenities available for the people,
measuring the monetary values through shadow prices etc., and create a system consistent
with existing practices. The Chairman also explained why sustainable development
should form part of national accounts.
Dr. Kaushik Basu said that a Climate Change Unit has been set up in Ministry of
Finance. He further mentioned that climate change and environment are being separately
dealt with in the Economic Survey and he would look for inputs from this Group so that
the subject under consideration of this Expert Group can be included in the Economic
Survey of the Government of India.
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Green National Accounts in India A Framework | 199
Dr. Manoj Panda, Director, CESS, Hyderabad in his presentation, covered
alternative indicators of GDP and the findings of the eight studies in the respective states.
The studies employed a host of market and non- market valuation techniques to highlight
the pollution abatement costs and the respective reduction in the State GDPs, the extend
of change in the air quality due to policy changes, the contribution of forestry sector in
the state GDP, depletion of forest assets, the extend of land degradation etc. The
methodological aspects, data issues in terms of availability, scalability and reliability and
standardization were brought out in the presentation.
Dr. Haripriya, in her presentation, tried to examine whether the current pattern of
growth in Indian states is sustainable. She considered forests, renewable natural capital,
minerals (non-renewable natural capital) and human capital to find out whether the total
stock of wealth is declining or not. She showed with empirical analysis that the states of
the union of India are following a weak sustainable path to development, though the
capital accumulation is positive in almost all the states. The environmental capital has
been decreased in most of the states showing that the critical capital is declining.
The Group had brief discussions before the presentations and detailed discussions
throughout the sessions of presentations in which the following points/issues emerged:
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200 | Green National Accounts in India A Framework
2. Measurement of wealth is a topic being dealt with since the time o f classical
economists. A number of alternatives have been proposed over time for the measurement
of wealth.
5. At national level all externalities are captured which may not be the case at sub-
national level.
6. Growth vs. Environment was the major point of origin of this Expert Group and
hence GDP should reflect the environment concern. As policy concerns are not
adequately measured in the existing system of national accounts, macro level estimates of
national accounts have to reflect the policy concerns of the Government.
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Green National Accounts in India A Framework | 201
9. More studies are to be encouraged to asses the states’ resources and to obtain
information at the micro level. Emphasis need to be given at the sectoral level.
10. A beginning has to be made to estimate the wealth of the states following the
conceptual measure of Dr. Partha Dasgupta.
11. Epidemiological data which can be used by environmental economists are not
organized properly. Therefore, collection of additional data for better reflection of GDP
measure needs to be planned and periodical coverage of such data needs to be ensured.
12. One should begin the valuation with forest and to be extended to other assets like
minerals. The non-productive assets like air quality data to be deferred till an appropriate
methodology is devised. There are also concerns about case studies on the assumption
they may lead to differing outcomes.
13. The framework suggested by SEEA could be made use of for preparation of the
green national accounts. The focus should be on NRA and compilation of stocks/flows of
NRA assets and valuation and to identify data needs with a time frame for
implementation.
14. The method of evaluation depends on what type of evaluation one thinks of.
Firstly, which areas of green national accounts are required for larger policy issues need
to be identified. Then what aspects of environment are captured in perverse way and what
dimensions need to be considered are to be identified.
15. Presently, the national accounts do not capture non- marketed goods/services and
made a point one should decide whether these affect macro- level policy and also whether
to be captured.
16. Newly added items under forestry in National Accounts and also manpower
requirements for collection of data were highlighted.
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202 | Green National Accounts in India A Framework
17. A beginning has to be made with a conceptual framework and then to identify
important sectors, issue of valuation in each sector and ways of filling up the missing
data.
18. A query was posed whether forest to be treated as one asset or as 3 or 4 assets.
19. Areas of air and water quality need to be included along with forest, land and
minerals.
20. Input-Output table may be extended by including natural resources as inputs and
emissions as by-products and required data may be captured either through NSSO
surveys or by other means.
The detailed discussions and exchange of different views of the Group members
have culminated into following decisions:
(1) The report of the Group should have a descriptive at the beginning indicating the
policy background and the objective of this exercise.
(2) The principal focus of this exercise is to develop a framework for Green National
Accounts i.e. for arriving at national level economic dimensions adjusted for
environmental damages.
(3) While capital produced by human efforts forms part of national accounts, the
natural capital is not accounted for in the national accounts and therefore, green
accounting measure of capital is necessary which has to adequately address the
policy concerns of the Government. It is also required to make an assessment of
the natural wealth of the nation and the depreciation of these assets ought to be
accounted for. In fact till green accounting gets stabilized and becomes a widely
accepted measure, the existing national accounts paradigm will continue. Thus the
exercise of computing the green national accounts will be complementary to the
existing established system of national accounts.
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Green National Accounts in India A Framework | 203
(4) There is a need to identify national level indicators which are used in computation
of national accounts and generate the correction factors to be applied on them, to
account for the degeneration caused to the environment due to the development
processes. It is necessary to segregate these into two categories into (a) those
indicators which are doable and (b) in principle doable but not in the near future.
(5) The Group must look into the feasibility of developing accounts for natural
resources. The natural resource accounting may be started with forest, land and
mineral resources. In case water and air, the challenges are more both in the areas
of data and concepts, particularly with regard to conversion into capital. There is a
need to deal with resolving the issues related to concepts during the course of the
work of the Group. Dr. Haripriya’s research paper may be considered as the
starting point. With respect to each area of the natural resource, data systems for
accounting need to be identified, the existing data sets will be described, missing
data sets will be identified and action will be proposed for filling up the gaps
taking into account the constraints within data collection machinery.
Consultations with Ministries/ Departments / Organizations may be done with
regard to missing data and filling up the gaps.
(6) In each area of natural resource accounting, as there would be a need for more
detailed studies for integrating the natural resource accounting into the national
accounts, the requisite type studies may be recommended . There may be a need
to generate replicable studies which can be scaled up for getting national level
proportions/ratios. Also out of 8 studies commissioned by CSO, those studies can
be replicated may be identified. The newly suggested studies could be taken up
during the 12th five year plan period.
(7) It is needed to identify and document agencies and the data which are brought out
by them (assessment of quantity of assets, valuation procedures). These agencies
may also be consulted in the next meeting which may be organized some time in
the last quarter of 2011-12 either in end of January, 2012 or during March, 2012
7
(8) The important question is whether fugitive resources such as air, surface water,
fish moving in water, etc., can be called as assets (capital). The Chairman offered
to prepare a note on the aspect of formalizing the fugitive assets similar to other
assets. The Chairman has also agreed to draft the introduction chapter on
conceptual framework.
(9) All the members would give a one-page write-up giving their views in addition to
what were discussed in the meeting.
The Second meeting of the Expert Group on Green National Accounting for India
was held during April 16-17, 2012 at National Institute of Public Finance and Policy, New
Delhi under the chairmanship of Prof. Sir Partha Dasgupta, Professor Emeritus, Cambridge
University, U.K. As decided in the first meeting of the Expert Group in August, 2011, the
Central Ministries/Departments/Central Government Organizations which deal with the
subjects related to environment were also invited to participate in the meeting.
Dr. T.C.A. Anant, Chief Statistician of India and Secretary and Member Convenor
of the Group, after welcoming all, mentioned briefly about the progress in the work of the
Expert Group after the first meeting and also about the purpose of the second meeting.
During the course of his address, Dr. T.C.A. Anant also co vered the salient features from
the paper titled ‘Developments in International Environmental Economic Accounting’ sent
by Mr. Peter Harper, Chair, UN Committee of Experts on Environmental Economic
Accounting and Deputy Australian Statistician for the meeting of the Expert Group and
touched upon System of Environmental Economic Accounting (SEEA) Central Framework
and recognition of SEEA as a standard document by UN Statistical Commission.
Thereafter, Prof. Partha Dasgupta, Chairman of the Expert Group mentioned about
the importance of human capital as a component of wealth of a nation and said that
presently wide discussions are going on among the academics and international
organizations on this. He was of the view that the present meeting would be an excellent
one as it would give an opportunity to the Expert Group to listen to presentations and to
have interaction with the participating organizations in the area of environment which
would throw light on the available data structures, how the same would be feasible to meet
the requirements of environmental accounting and what changes would be required so that
the available data could be converted for the purpose of the environmental accounting
framework.
(i) Indian Council of Agricultural Research, New Delhi (land, soil and
agriculture and allied sector)
(ii) Forest Survey of India, Dehradun ( forests)
(iii) Central Pollution Control Board, New Delhi ( air/water pollution)
(iv) Prof. Janakarajan, Madras Institute of Development Studies, Chennai
(overall environmental accounting with regard to surface water – rivers)
(v) Botanical Survey of India, Kolkata ( flora)
(vi) Zoological Survey of India, Kolkata ( fauna)
(vii) Ministry of Earth Sciences, New Delhi ( activities of the Ministry from
the environmental accounting point of view )
(viii) Geological Survey of India, Jaipur ( activities of GSI from the
environmental accounting point of view)
(ix) Indian Bureau of Mines, Nagpur (Minerals)
(x) Central Water Commission, New Delhi (Surface and Ground water and
Irrigation)
(xi) Prof. Haripriya, IIT, Bombay (Data Requirements and availability in
respect of sectors forests, land and mines)
(xii) National Natural Resources Management Systems, MOEF, New Delhi (
Projects on environment subjects)
(xiii) Social Statistics Division, CSO, MOSPI, New Delhi (Way Forward)
All the presentations were mainly on existing data structures with regard to the
respective Departments/Organizations from environmental accounting point of view in
order to give a board picture to the Expert Group to be able the Group to decide on the
sectors/sub-sectors of environment to be included in the accounting framework from
the angle of feasibility and implementation. All the presentations were well appreciated
by the Expert Group. Each presentation was followed by a discussion .
(i) Conversion of degraded land into productive land is an important aspect and it
would be useful to have some estimates of investments required to maintain the
requisite area of land productive.
(ii) The data on land degradation were based on the available data with various state
governments (may not pertain to the same period ) and consolidation of the same
was an one-time exercise. It would not be feasible to update this information
frequently. However, data on land capability classes are available. Using
sampling of land classes, it could be possible to update land degradation data
from time to time. Also possibility of using GIS technology for this purpose may
have to be explored.
(iii) It would be useful to have the share of land degradation on account of natural
causes and on account of economic activities.
(i) As monitoring of forest fire is done by FSI and State Forest Departments are
appraised of the same, this information could be useful.
(ii) As regards production and consumption of forest products, data are available
through the production and consumption study done by FSI..
(iii) Assessment and valuation of trees outside forests is an important factor. In
fact, trees out of forest area and minor products were included in the national
accounts in 2004-05 and since then there has been substantial contribution on
account of these items to GDP.
(iv) FSI uses three different definitions and it may be decided which definition to
follow so that the classification like agriculture land in forest, private forest
area, etc. can be settled.
(v) With respect to valuation, pricing of forest trees might vary vastly due to
policies of some State Governments..
Prof. Janakarajan
(i) Data on use of water are available with State Irrigation Departments. One can
collect the data from States. Also water quality monitoring stations set up by
States generate data on water pollution which need to be collected and
consolidated.
(ii) The data available with CWC pertain to major rivers only. Data on small
rivers, sub-stream flow, etc. which are also important are not available.
(i) There is a need to measure change in bio-diversity between two points of time
(at least decennially) for various purposes (eg.conversion of forest areas for
non- forest activities). It is difficult to re-visit the areas/places for such a
purpose, at least information must be generated to measure changes on sample
basis. Whether under any project, time series data on change are available?
(ii) There exists potential bio-diversity in non-forests. How to capture this
information? Specifically, given correlation between different types of bio-
diversity, a possible approach could be for FSI to come out with some Tree
diversity index, which can be used for estimating information on bio-diversity.
There is a need to bring linkage between bio-diversity data and FSI data (like
canopy cover).
(iii) Valuation is complicated with respect to bio-diversity. In particular, hot spots
(bio-diversity rich areas) are more important and will thus need to be treated
(i) There are rich data available even at district level on flora and fauna with BSI
and ZSI in monographs, research papers, etc. which need to be properly
consolidated and disseminated . At least for environmental accounting, these
can be collected from them and used.
(i) Vast and potential data with regard to climate change and environmental
aspects relating to coastal areas, ocean, etc. are available with the M/o Earth
Sciences.
(i) Indian Bureau of Mines has lot of data on production of minerals, etc. In the
case of pollution, data are available only for the periods pertaining to getting
clearances by the mining companies. There is a need to explore mechanism of
gathering data on pollution and water use during the period of operation of
mining concessions.
(i) There is lot of data available in the area of water. CWC brings out three
publications, viz, Water Year Book, Sediment Year Book and Water Quality
Year Book which provide lot of data on water. Further, data relating to water
are available with Central Ground Water Board (CGWB) and M/o Water
Resources. Also ground water level monitoring through 15000 observation wells
generate certain data. With regard to cause of sediment, whether any information
is available and if not how to get the same?
(ii) Water Quality monitoring stations of CWC and Water Quality monitoring
stations of CPCB seem to be different. There is a need for further details in this
area and to find out whether both can be combined so that more coverage is
achieved.
(iii) Surface water and ground water are to be combined for the purpose of
information on water availability and use. What should be the unit in this case?
Further, what should be the level of disaggregation for water use?
(iv) CGWB has projects at selected places with regard to water re-charge measures.
Can such information be used in some way?
(v) Water Balance Studies are done by many states.
(vi) Can ASI data be used for water information?
(vii) In ASI 1997-98, three types of information relating to environment were
collected viz. (i) whether pollution caused by industry (air, water, etc.)?, (ii)
whether abatement measures were taken? and (iii) value of assets on pollution
control. These details were collected only during that year and were
subsequently dropped. Presently, only information on value of pollution control
equipment is collected which is also not compiled.
7
(viii) With regard to collecting data through ASI on environment related information,
one needs to keep in mind the length of ASI schedule so as to ensure that the
quality of information is not compromised.
(ix) Under water quality, there is a need to have information separately on industries
polluting surface/ground water.
Prof. Haripriya
(i) FSI provides lot of requisite data for physical accounting of forests, etc.
Information on changes due to consumption of natural resources is relevant and
hence required. Other than the published data, FSI maintains lot of other data
required for the purpose of accounting which could be made available.
(ii) Whether to include economically proven reserves or proven and probable
reserves or the entire resource base? In case the entire resource base is to be
included, then an extended framework will be required.
(iii) There is inconsistency in data pertaining to mines between the periods pre-2003
and post-2003 because of change in the definition of classification. Can IBM do
something on this?
(iv) How to get data on increase in mines reserves?
(i) NNRMS programme covers several projects like forest type mapping, coastal
studies, mapping of wild life sanctuaries, national parks, snow & glaciers, etc.
This presentation identified the do-ables, medium- term plan and long-term
plan. The plans were identified based on (i) two parts of the Reports of CESS
(Centre for Economic and Social Studies, Hyderabad) prepared on the basis of
the 8 studies on Natural Resource Accounting (NRA) commissioned by CSO,
(ii) outcome of the discussions of first meeting of Expert Group held in August,
2011, (iii) outcome of the meeting of the Technical Advisory Committee on
NRA headed by Dr. Kirit Parikh held in March,2012 and (iv) availability of data
for various sectors of environment for preparation of physical and monetary
accounts. The following are the highlights of the discussions:
(i) Satellite accounts, sector-wise, would be useful as these will enable to infer on
wealth related parameters.
(ii) There is problem of additivity in the case of physical assets for aggregation. In
order to overcome this, monetary valuation is required.
(iii) Valuation is difficult in areas like eco-tourism, non-timber forest products, etc.
In such cases, is it possible to develop some coefficients which can be used to
derive estimates?
Detailed discussions and exchange of different views of the Group members and
special invitees have culminated into the following decisions:
1. The Report of the Group would cover all aspects of Green National
Accounting consisting of theoretical framework, existing system of national
accounts, doables under environmental accounting and medium and long term plans.
4. The Interim Report would essentially be a draft version of the final report
comprising the following:
(iii) The third chapter will have a summary of concepts and methods followed
under national accounts of India and coverage of environment in the national
accounts. This chapter will also include salient features of SEEA (based on
Central Framework) and in what manner environment can be incorporated
into national accounts. Also some illustrative tables may be included in this
chapter.
(Action: NAD/SSD, CSO)
(iv) The last Chapter will be on do-ables, medium and long –term plans based on the
paper circulated by CSO. This Chapter would also discuss o n data requirements
for implanting green accounts, data availability and gaps and suggest areas
where studies/surveys would be required.
(Action: SSD & Prof.Haripriya, IIT, Bombay)
6. The Interim Report should be ready by early June, 2012 which would then be
circulated to concerned Central Ministries/Departments/Organizations for their
views/comments/suggestions by July, 2012.
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218 | Green National Accounts in India A Framework
25. Dr. Paramjeet Singh Director, Botanical Survey of India, Special Invitee
Kolkata
26. Dr. K. A. Subramanian Scientist, Zoological Survey of Special Invitee
India, Kolkata
27. Shri. Rajesh Kumar Director, Forest Survey of India, Special Invitee
Dehradun
28. Shri. J. C. Dagar Asstt. Director General, Indian Special Invitee
Council of Agricultural Research,
New Delhi
29. Shri. James Mathew Director, SSD, CSO, MOSPI, New Special Invitee
Delhi
30. Dr.H.Kharkwal Deputy Director, MOEF, New Delhi Special Invitee
The third meeting of the Expert Group on Green National Accounting for India was held
on 6th and 7th of December, 2012 at National Institute of Public Finance and Policy, New
Delhi under the chairmanship of Prof. Sir Partha Dasgupta, Professor Emeritus,
Cambridge University, UK. The list of participants in the meeting is enclosed.
Dr. T.C.A.Anant, Chief Statistician of India and Secretary, Ministry of Statistics and
Programme Implementation, and Member Convener of the Group, after welcoming all,
said that this would be purely a business meeting to discuss the draft chapters circulated
and obtain inputs for finalizing the draft report which should spell out a roadmap for
green national accounting for India which, interalia, include incorporating the elements of
natural resources into the system of national accounts. He mentioned that in the second
meeting held in April 2012, the Group did a detailed review of the availability of data
relating to sectors associated with the environment. In this meeting, the draft report
would need to be finalized so that after incorporating the comments/suggestions, the final
draft could be circulated to the concerned Government Departments and other
stakeholders by February 2013. This process would enable the Group to submit the
Report to the Government by June 2013.
Prof. Partha Dagupta, Chairman of the Group gave a brief account of the draft chapters
circulated and more details about the first chapter on the conceptual framework. He
indicated the need for wealth accounting and moving from GDP to NDP, as the latter
would be a better indicator for measuring the wealth of a country. He mentioned about
the importance of having strong foundations for wealth accounting which includes human
capital also. He was of the view that there would be a great deal of attention to health
besides environment in the coming years. He also said that not only net savings b ut also
growth rate of savings would have to be monitored.
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220 | Green National Accounts in India A Framework
Thereafter, Chapter 1 of the draft report on Conceptual Framework of Green Accounting
was taken up for discussion. The following are the salient features of the points emerged
out of the discussions:
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222 | Green National Accounts in India A Framework
14. Pollution control expenditure is consumption expenditure and the related
measures do not add to stock. This is the problem with other defensive
expenditures also.
15. The present draft report is different from the report of the project commissioned
to Centre for Economic and Social Studies (CESS) for synthesizing the 8 studies
undertaken by CSO through various research/academic institutes, and various
studies done in India and internationally in the field of Natura l Resource
Accounting, in the sense that the report of the Expert Group is more of a macro-
level report as it includes a broad conceptual framework of Green National
Accounting.
16. The report may broadly have three parts relating to (i) what modifications of SNA
are required to include environmental factors i.e. a conceptual framework along
with translation into implementable parts? (ii) areas for further research,
discussions etc. and (iii) how to capture sustainability and inter-generational
wealth.
17. There is a need to have another chapter in the report, i.e. chapter 2 which would
spell out the transition from conceptual framework to actual implementation.
Thereafter, a presentation on chapter 2 viz. “SNA in India and SEEA” was made by Shri.
V. Parameswaran, which covered in brief the broad System of National Accounts which
is in practice in India, highlights of activities included in the compilation of National
Accounts Statistics relevant to environment, limitations of National Accounts with
respect to environment, the concept of SEEA, the features of SEEA Central Framework,
classification of environmental assets in the SEEA Central Framework, comparison
between SNA and SEEA in terms of production and asset boundaries etc., and
environmental factors not included in SNA. This presentation was followed by detailed
discussions, the highlights of which are as under:
1. It was noted that there were differences in asset boundary of SNA and asset
boundary of SEEA in physical terms, whereas in monetary terms the asset
boundaries of SNA and SEEA Central Framework were the same.
Green
4 National Accounts in India A Framework | 223
2. From the PSUTs and asset accounts it was observed that for implementation of
SEEA in India it would be necessary to have the type of classification indicated in
the tables of SEEA Central Framework from the type of classification possible as
per availability of data.
3. Based on tables of environmental accounting, would it be possible to forecast?
4. For the present, the ideal situation could be to keep the SNA intact and expand the
tables to produce PSUTs, etc. for environmental factors.
5. The environmental accounting does not bring any change in GDP but it changes
only NDP. At some point of time, production boundary would need to be re-
visited, in which case GDP would also be affected.
1. It was observed from the tables developed that many of the cells were vacant
implying non-availability of data.
2. The classification shown in the tables does not match with the classification as per
SEEA tables implying that merging of some categories would be required to bring
the tables on line with SEEA.
3. For developing accumulation account, information about degradation would be
required. In this context, it may be mentioned that with regard to computation of
CFC, valuation is not an issue. However, one needs to give attention to valuation
of non-produced assets as it is not same as valuation of produced assets.
There was also a presentation on “Way Forward” by Shri. V. Parameswaran, and there
were discussions on the same.
The following are the decisions that emerged out of the discussions in the two day
meeting:
1. The immediate do-able would be preparation of PSUTs and Asset accounts. For
this purpose, the classification of environmental assets as per SEEA may not be
followed, and these tables would be prepared for the sectors (i) Land and Soil (ii)
Forest and Timber (iii) Minerals. The components like landfill and solid waste
would be linked to relevant environmental assets as classified here.
Green
8 National Accounts in India A Framework | 227
List of Participants
3rd Meeting of Expert Group on Green National Accounting for India at National Institute
of Public Finance and Policy, New Delhi during 6-7 December, 2012.
Sl. No. Name Designation
1. Dr. Partha Dasgupta Professor- Emeritus, Cambridge Chairman
University, UK
2. Dr. Pronab Sen Principal Economic Advisor, Member
Planning Commission
3. Dr. Nitin Desai D-63, Defence Colony, New Delhi Member
4. Dr. Kirit Parikh Former Member, Planning Member
Commission
5. Dr. Kanchan Chopra Former Director, IEG, Delhi Member
6. Prof. K. Sundaram Professor (Retd), DSE, Delhi Member
7. Dr. Haripriya Gundimeda Associate Professor, IIT, Bombay Member
8. Dr. Priya Shyamsundar Program Director, SANDEE, Member
Bangkok
9. Dr. E. Somnathan Professor, ISI, Delhi Member
10. Dr. T. C. A. Anant CSI & Secretary, MOSPI Member –
Convener
11. Dr. Manoj Panda Director, IEG, Delhi Special Invitee
12. Shri. V. K. Arora ADG, ESD, CSO Special Invitee
13. Shri. Vijay Kumar ADG, NASA, CSO Special Invitee
14. Smt. S.Jeyalakshmi ADG, SSD, CSO Special Invitee
15. Shri. Ashish Kumar ADG, NAD, CSO Special Invitee
16. Dr. N. Egambaram DDG (Retd.), NAD, CSO Special Invitee
17. Shri. V. Parameswaran DDG, SSD, CSO Special Invitee
18. Smt. Vandana Agarawal EA, MoE&F Special Invitee
19. Dr. S. Durai Raju DDG, NAD, CSO Special Invitee
20. Smt. Shailaja Sharma DDG, NAD, CSO Special Invitee
21. Smt. T. Rajeswari DDG, NAD, CSO Special Invitee
22. Shri. James Mathew Director, SSD, CSO Special Invitee
23. Shri. S. Suresh Kumar Deputy Director, SSD, CSO
24. Shri. R. K. Panwar SSO, SSD, CSO
25. Shri. P. Sai Manohar Consultant, SSD, CSO