A high GDP growth rate based economy in the context of unacceptable levels of pollution

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By Shankar Sharma*

While addressing chief ministers of the states in July 2019, Prime Minister Narendra Modi was reported as having said that he wanted India to be a “$5 trillion economy” by 2024. This means roughly doubling of the size of our economy in 5 years. As a part of the efforts to accelerate the economic activities of the nation, the Union government of India had announced in February 2018 its decision to set up 12 additional nuclear power reactors.

Also being planned and constructed are many coal based and dam based power plants to support the energy demands of such an accelerated economic activity. The country has also embarked on having a total capacity of 175,000 MW of renewable energy by 2022.
These are all a part of the ‘ease of doing business’ environment, and “making India global hub of manufacturing” in addition to massive number of activities/investments in setting up roads, railways, dams, industries, airports etc.

When we also take note of the official statements that the country has surplus power generating capacity to last for several years, and that the country is looking for opportunities to export electricity, there seems an urgently added need to reviewthe high GDP growth rate paradigm keeping the all-round welfare needs of the country.
In an article in “The Hindu” (May 14, 2016), C Rangarajan, former Governor, Reserve Bank of India had said: “The “potential to grow at 8 to 9 per cent at least for a decade exists. We have to make it happen.”

The successive governments in the country have been focusing on such a high GDP growth rate since 1990s, as the road map to eliminate poverty in the country. After decades of such focus on high GDP growth rate, it has become essential to take a stock of the experience for the society as a whole. The question should be asked whether such a high growth year after year is desirable or whether it is in the true interest of our communities.

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

Very often the issues of ‘economic development’ and ‘environment’ are wrongly pitted against each other, instead of focusing on how economic development can be achieved on a sustainable basis without compromising on the all-important environment. Since everything we see around us is provided by the nature the necessity of harnessing the natural resources on a sustainable basis need not be emphasised.

A frenetic growth in non-agricultural sectors, as happening in many states of our Union, can lead to the instability (directly and indirectly) in the production and productivity of food and other agricultural products. Such a probability of lowered agricultural output in the context of huge population, which is estimated to be about 1.5 Billion by 2050, should be a matter of matter of grave concern to our country.

There are also genuine concerns among the environmentalists, that the policy of high GDP growth at any cost is seriously compromising the environment, as evidenced by the deteriorating environment all over the world.

The serious concerns on the pollution of air, water and soil, as has been reported from different parts of the country, cannot be ignored any longer. The fact that global warming is clearly associated with hugely deleterious impact on food production should make this issue of even greater concern.

The recent past history of high GDP growth rate

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

time

If the “potential to grow at 8 to 9 per cent at least for a decade” should be made to happen, as C. Rangarajan has suggested, the country’s economy can become double in 9 to 10 years. The doubling of the economy in a decade will have many serious issues to bother the society, besides doubling the “wealth” of the country.

The primary question should be whether this doubling of the “wealth” in a decade should also come at a huge cost to some sections of our society, and how much such societal costs are acceptable.

A sustained high GDP growth rate will mean the manufacture of products and provision of services at an unprecedented pace leading to:

  • setting up of more factories/ manufacturing facilities; consumption of large quantities of raw materials such as iron, steel, cement, chemicals etc.;
  • increasing an unsustainable demand for natural resources such as land, water, minerals, timber etc.;
  • acute pressure on the Government to divert agricultural /forest lands; huge demand for various forms of energy (petroleum products, coal, electricity etc.);
    accelerated urban migration;
  • clamour for more of airports, airlines, hotels, shopping malls, private vehicles, express highways etc.

Vast increase in each of these activities, while increasing the total greenhouse gas (GHG, responsible for global warming) emissions, will also add up to reduce the overall ability of natural carbon sinks such as forests to absorb GHG emissions. There will also be increased pollution of land, air and water along with huge issues of managing the solid, liquid and gaseous wastes.

In this context it is worthy of drawing one’s attention to what is stated on the topic by the draft National Resource Efficiency Policy (NREP), 2019 by the Ministry of Environment, Forests and Climate Change (MoEF&CC). It says among other things:

Driven by rapid economic and population growth, the demand for natural resources, especially materials have grown manifold over the last few decades. In the endeavour for economic growth, natural resources have been largely indiscriminately exploited, adversely impacting the environment and biodiversity.

“Further, cross linkages between resource use, climate change, land degradation and biodiversity loss has been scientifically well established. Meeting the demand for products and services, of rising population with increased aspirations has led to mostly indiscriminate exploitation of natural resources and would further lead to increased pressure on resources resulting in environmental degradation, thereby raising sustainability concerns.”

It goes on to say: 

“India, as one of the fastest growing economies with GDP at 2.6 trillion USD, has increased its material consumption to six times, from 1.18 billion tonnes in 1970 to 7 billion tonnes in 2015, however this economic growth has been coupled with inherent cost on natural environment. The material consumption is projected to more than double by 2030, in order to provide for increasing population, rapid urbanization and growing aspirations.

“The projected pace of economic development is going to put pressure on already stressed and limited resources and may lead to serious resource depletion and environment degradation affecting the economy, livelihoods and the quality of life. Further, material use is also closely associated with the problem of increasing wastes, which when suitably processed could deliver valuable secondary resources.”

On the current status, the draft lists many concerns:

High import dependency of many critical raw materials; 30% of land undergoing degradation: Highest water withdrawal globally for agriculture; 3rd highest CO2 emitter, responsible for 6.9% of global CO2 emissions; Much lower recycling rate at 20-25% vis-à-vis of as high as 70% in developed countries (Europe); Low material productivity compared to global average; 3rd largest material demand (year 2010); Resource extraction of 1,580 tonnes/acre is much higher than the world average of 450 tonnes/acre.”

The baseline assumption (as stated in Integrated Energy Policy of the erstwhile Planning Commission in 2011) that the country needs to sustain an economic growth of 8 – 9 % over next 20 years to eradicate poverty and to meet its human development goals, will lead to very many intractable problems for the society from social and environmental perspectives.

Such a high growth rate has never been found necessary in developed economies, where even at the highest growth period they are reported to have registered only 3-4 % growth. The so called “trickle down” benefits to vulnerable sections of our society through 8-9 % growth will be negligible as compared to the all-round benefits associated with inclusive growth of a much reduced rate, say 3-4%, if we harness our natural resources responsibly and equitably.

Hence, the obsession with high GDP growth rate target should be diligently reviewed against a paradigm shift in our developmental objective, which will give priority for inclusive growth aimed at sustainable and responsible use of natural resources.
At a time when our natural resources are getting depleted at an alarming rate, and when the pollution of air, water and land have become major health concerns, the above scenario cannot be ignored any longer, and hence needs a due diligence.

The consequential social and environmental impacts of high GDP growth rate in China, Indonesia, Malaysia, Bolivia etc. for many years continuously should establish that the concerns are similar everywhere, whereas the poverty has not been eliminated fully.

The Club of Rome, which is a global think tank, had raised considerable public attention in this regard way back in 1972 with its report ‘The Limits to Growth’.  It had predicted that economic growth could not continue indefinitely because of the limited availability of natural resources, particularly oil.

In 2011 a book-length article was published as an academic study of ‘The Limits to Growth’, its methods and historical reception. This article concluded that “The warnings that we received in 1972 … are becoming increasingly more worrisome as reality seems to be following closely the curves that the … scenario had generated.”

The continued economic policy of high GDP growth rate by successive governments should be reviewed keeping in view the following issues:

a. Air pollution in India is so bad that it kills about half a million people every year.
b. Despite a high GDP growth rate since 1996, about 30% of the population in the country are reported to be below poverty line.
In a business as usual scenario
c. It is projected that about 60% of all the buildings we are likely to see in the country by 2050 are yet to be built;
d. Beyond 2050 at the global level the cities are projected to account for more than 60% of natural resources, energy and pollutants;
e. India’s electricity consumption is projected to increase by 4 times by 2050.

Concerns on environment and climate change

Environmental scientists have been raising the issue whether high growth of economy is sustainable over longer periods, and whether it should be pursued at the cost of environment. Environmental economists also emphasise that the developed countries never had a high growth rate, but achieved adequate level of human development index (HDI) by inclusive growth, as against what has been occurring in most of the developing countries.

The net effect associated with high GDP growth target will be that the total GHG emissions will increase by considerable margin, even if we adopt most energy efficient processes, and the reduced emission intensity of the state’s GDP is feasible. The desirability of such high GDP growth rate scenario to our society needs to be questioned in the context that the increase in total GHG emissions will be closely associated with the increased pollution of air, land and water; and the increased denial of access to natural resources to the vulnerable sections of the society.

Reduced area and density of forests, dammed rivers, forced displacements which will all be the consequences of a frenetic 8-9% GDP growth are bound to impact the vulnerable sections of our society adversely. Since the vulnerable sections of the society are also the most impacted lot due to climate change, the true relevance of such high GDP growth to our communities need to be questioned with a rational approach.

A quick look at the possible impact of sustained high GDP growth on the critical sectors of the Indian economy can reveal a disturbing trend. The transport sector will demand much higher consumption of energy such as diesel, petroleum and LNG. These products which already have about 80% import content can only increase with disastrous consequences on energy security.

The pollution loading of vastly increased consumption of petroleum products, which has given rise to concerns in urban areas already, is likely to reach extremely unhealthy levels. Along with increased GHG emissions and much higher levels of suspended particulate matter, the pressure on the transportation infrastructure can become unmanageable. Increased use of private passenger vehicles, which is already a huge concern in urban areas, will escalate to choke our roads and lungs.

Vastly increased industrial activities, as a consequence of high GDP growth rate, will put unbearable demand on land, fresh water, energy and other raw materials. Such a demand on land (such as in SEZs, coastal industrial corridors, large size coal power plants, nuclear power parks, IT&BT parks etc.) have already given rise to a lot of concerns to social and health scientists, and already has witnessed social upheavals as in Narmada valley, Singur in West Bengal, Niyamgiri Hills in Orissa etc.

Under such a scenario the industrial sector, which is already responsible for about 21% of GHG emissions in the country, will contribute hugely to the increase in total GHG emissions. Similarly, high GDP growth rate will lead to steep increase in demand for building activities in the form of factories, transportation infrastructure, offices, hotels, airports etc. which in turn will put huge demand for construction materials and energy. In this scenario can the increasein GHG emissions be contained adequately?

The most telling impact of frenetic economic growth over the next 20 years will be on forests, rivers and other natural resources, which in turn will lead to reduced capacity of nature’s carbon sinks. As against the National Forest Policy target of 33% of forests and tree cover, the country has less than 20% of the same, whereas the forests in tropical countries are considered to be very important sinks of Carbon di-oxide (CO2).

The demand for additional lands and minerals for the increased activities in all the above mentioned sectors will further reduce the forest & tree cover, which in turn will severely impact the availability of fresh water and on the nature’s ability to absorb GHGs. The impact of vastly reduced forest and tree cover on human health and on all aspects of our society is well known, and hence requires no detailed elaboration.

Whereas the increased economic activities associated with high GDP growth rate will certainly result in vastly increased GHG emissions, the same will also reduce the ability of forest & tree cover to absorb GHG emissions from the atmosphere. In this scenario it is anybody’s guess as to how the net GHG emissions can be reduced to an acceptable level.
There is the critical need to appreciate the fact that there is a limit to the nature’s ability to support human activities / desire/ demand. Such a demand on the nature must be carefully managed, which is not possible if we set a target a high GDP growth rate year after year for a huge population base as in India, which is growing every year.

The consequences of high GDP growth rate will result in depriving the weaker sections of the society even the access to natural resources (such as to the forests, rivers and ocean), while driving the fragile environment to a point of no return. Does our society need such an eventuality? Is this what we want from Climate Change perspective?

Social impacts

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

  • Although the past decade of rapid economic growth has brought many benefits to India, the environment has suffered, exposing the population to serious air and water pollution.
  • The report finds that environmental degradation costs India $80 billion per year or 5.7% of its economy.
    Green growth strategies are needed to promote sustainable growth and to break the pattern of environmental degradation and natural resource depletion. Emission reductions can be achieved with minimal cost to GDP.
  • In this context it can be added that in the medium to long term such emission reductions can even add to GDP through positive feedback impacts.
  • Simultaneously, poverty remains both a cause and consequence of resource degradation: agricultural yields are lower on degraded lands, and forests and grasslands are depleted as livelihood resources decline. To subsist, the poor are compelled to mine and overuse the limited resources available to them, creating a downward spiral of impoverishment and environmental degradation.
  • Environmental sustainability could become the next major challenge as India surges along its projected growth trajectory.
  • A low-emission, resource-efficient greening of the economy should be possible at a very low cost in terms of GDP growth. While a more aggressive low-emission strategy comes at a slightly higher price tag for the economy it promises to deliver greater benefits.
  • For an environmentally sustainable future, India needs to correctly value its natural resources, and ecosystem services to better inform policy and decision-making. The report says the green growth is eminently feasible: “Green growth is necessary; green growth is affordable; Green growth is desirable; Green growth is measurable. It can be argued that without green growth, India’s future development however measured will be at great risk.”
  • A low-emission, resource-efficient greening of the economy should be possible at a very low cost in terms of GDP growth. A more aggressive low-emission strategy comes at a slightly higher price tag for the economy while delivering greater benefits.
  • Emissions reduction would have a minimal impact on GDP which would be offset by savings through improving health while substantially reducing carbon emissions. A 10% particulate emission reduction will lower GDP only modestly. GDP will be about $46 billion lower in 2030 due to interventions, representing a loss of 0.3 % compared to business as usual.
  • A 30% particulate emission on the other hand reduction will lower GDP by about $97 billion, or 0.7 %. GDP growth rate will be negligibly reduced by about 0.02 to 0.04% in both scenarios. There will be significant health benefits under both scenarios which will more than compensate for the projected GDP loss.
  • The savings from reduced health damages will range from $105 billion in the 30% case and by $24 billion with a 10% reduction. Under both the scenarios, another important benefit would be a substantial reduction in CO2 as a co-benefit which has a potential of being monetized. Taken together the CO2 reduction and the health benefits will be greater than the loss of GDP in both cases.

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

These World Bank estimates may indicate that the net growth in our economy is probably negative when we take the environmental degradation and health costs into objective consideration. In this context, how advisable is it to plan to double the size of our economy in the next 5 years, as the target of $5 trillion economy by 2014 should mean? The serious concerns to our communities will be multifarious.

It should become clear from these discussions that, whereas it is evident that an economic policy focusing on high GDP growth rate year after year has not resulted in the elimination of poverty in India, it is certainly leading to accelerated depletion of our natural resources and to the unacceptable level of pollution of land, water and air, while certainly contributing to global warming phenomenon.

Keeping in view the need to contain the global warming and the vastly increasing pollution loading, the relevance of a high GDP growth rate paradigm for the country needs to be effectively discussed at the societal level from the perspective of overall welfare of every section of our society.

As far back as 1974, the Cocoyoc Declaration in Mexico, had unequivocally stated the criticality to limit our needs within the nature’s limits. Organized by UNEP and the United Nations Commission on Trade and Development (UNCTAD), this symposium identified the economic and social factors which lead to environmental deterioration. “The combined destructive impacts of a poor majority struggling to stay alive and an affluent minority consuming most of the world’s resources are undermining the very means by which all people can survive and flourish”.

Other statements in the Cocoyoc Declaration illustrate the clarity in understanding the difficulty of meeting human demands sustainably from an environment under pressure:

‘The problem today is not one primarily of absolute physical shortage but of economic and social mal-distribution and usage.’

The task of statesmanship is to guide the nations towards a new system more capable of meeting the inner limits of basic human needs for all the world’s people and of doing so without violating the outer limits of the planet’s resources and environment.’

‘Human beings have basic needs: food, shelter, clothing, health, education. Any process of growth that does not lead to their fulfillment – or, even worse, disrupts them – is a travesty of the idea of development.’

‘We are all in need of a redefinition of our goals, or new development strategies, or new lifestyles, including more modest patterns of consumption among the rich.’

An indication of the importance of various ecosystems around the world can be seen in a paper “Payment for Ecosystem Services (PES) in Kodagu, in Kodagu, Western Ghats of India: A Case study, 2012” by College of Forestry, Ponnampet, Kodagu, Karnataka. This paper starts with the threat facing the ecosystems around the world. It says:

“The planet is experiencing a period of rapid ecosystem degradation, species loss and climate change. The deterioration of biodiversity is reaching unprecedented levels, with an extinction rate reported in the 2005 Millennium Ecosystem Assessment to be 1,000 times higher than what has been typical over most of the earth’s history (UNEP, 2010). Biodiversity loss threatens the well-being of human societies and less diverse and degraded ecosystems are compromising the livelihoods of many vulnerable communities around the world.”

Unfortunately for India, despite all the advantages – namely salubrious climate suitable for low carbon living, still rural based economy, not yet addicted to much of commercial energy, potential to transit to knowledge economy from agricultural economy skipping industrial economy, and inheriting the values of simple life style from more than 5,000 years old civilization –the governance in the country is influenced more by the western belief of material wealth than by Mahatma Gandhi’s principle of simple living with a global outlook.

Whereas, it can be credibly stated that every segment of our economy is contributing to the pollution loading and to the fast deterioration of our environment, it is certainly true in the case of energy/ electricity.

The pollution issues of coal mining, transporting, and burning and ash management in the case of coal power plants; socio-environmental concerns in the case of dam based hydro power plants; the radiation hazards associated with nuclear power plants; and the burning of petroleum products in vehicles have certainly made the energy/electricity sector as critical sector to review diligently in the context of high GDP growth rate.

As per the State of Global Air 2019  by US-based organisation Health Effects Institute (HEI), overall long-term exposure to air pollution contributed to nearly 5 million deaths from stroke, diabetes, heart attack, lung cancer, and chronic lung disease in 2017.
A suitable developmental model for India

Which Indian in his senses would want to be anti-development? The question, therefore, is about the very nature of development needed and what we mean by that term. Which of the following can be called a part of true development:

  1. to cut down mountain ranges in the Western Ghats for putting up industrial plants or power plants or railway lines or power lines or dams?
  2. to take tribal lands away without giving the inhabitants either a say in the matter or meaningful rehabilitation plans?
  3. polluting our rivers by industrial effluents or excess water through agricultural run off ?
  4. destroying our ecologically rich and green hills through unscientific mining practices?
  5. reducing the forest and tree cover to less than 20% as against the national forest policy target of 33%? Some or all of these can be the consequences of a high GDP growth rate.

Our developmental pathway has to be reviewed in the context of such ecological issues and the stark fact that thirteen of the world’s most polluted twenty cities are in India, with New Delhi ranking as the most polluted city in the world (WHO report, 2014).  Few cities in most of the states, including a large number of small towns, are reported to have air pollution in breach of WHO standards.

Similarly, almost every river stretch is deemed to be unfit for domestic purposes without proper treatment. When we also consider the fact that the soil contamination has led to contaminated food items too, the future looks bleak for our communities. Hence, the question comes whether the high GDP growth paradigm should be pursued blindly, and for whose benefits.

Since the true objective of the national level and state level policies and plans should be to ensure all-round welfare of all sections of our society and to protect effectively the vulnerable sections of our society from the ravages of the Global Warming, there cannot possibly be any compromise in the much needed paradigm shift in the development concept for our densely populated communities.

Chronic issues such as clamour for materialism, unabated energy requirement, increasing demand for diversion of forest lands, unending urban migration etc. cannot be ignored any longer if we hope to see the possibility of containing the Global Warming within manageable limits.

Keeping in view the constraints of the geographical features of many states, such as vast stretches of arid/semi-arid zones, large drought prone areas, limited fresh water resources, absence of coal/fossil fuel reserves etc. the developmental plan for such states should focus on eliminating the poverty while conserving/enhancing the CO2 sinks by encouraging those employment sectors which can provide jobs for a large number of people and consume minimum of the natural resources and energy, and without causing too much pollution impacts. In this context higher focus on forest based, agriculture based and allied sectors of our economy should be considered as immediate option for sustainable development.

UN’s Cocoyoc Declaration (Mexico, 1974), and the report “Prosperity without growth? – The transition to a sustainable economy” by the Sustainable Development Commission (SDC), which was the UK Government’s independent adviser on sustainable development have come to the similar conclusions. The fact that high GDP growth rate cannot be pursued indefinitely and hence cannot be sustainable is being acknowledged widely.
Shall we not focus on those economic activities which will not lead to further diversion of forest/agricultural lands, which will not demand much of water and energy, which will not lead to pollution of land, air and water, and which will lead to sustainable harnessing of our natural resources?

Such activities may include sustainable agriculture, horticulture and animal husbandry, forestry, health and educational services, IT&BT, eco & health tourism etc. In this context it is pertinent to know what the Tamil Nadu State Action Plan on Climate Change (TNSAPCC) has said. It says: “Global development experience reveals that one percent growth in agriculture (and associated activities?) is at least two or three times more effective in reducing poverty than the type of same growth emanating from non-agricultural sector.”

Keeping in view the dire need to contain the GHG emissions and the vastly increasing pollution loading, the relevance of a high GDP growth rate paradigm for the country needs to be effectively discussed at the societal level from the perspective of true welfare of every section of our society. Are we rational enough to take a diligent view of all these and other associated issues in our development pathway as a truly welfare society?

Can we hope that the tall claims by the government on the issue of Climate Change and on the much advertised campaign ‘sub ka saath, sub ka vikaas’ will be matched by an effective action plan to minimize the pollution and contamination issues for our communities, by moving away from the high GDP growth rate paradigm urgently? *

*Power policy analyst. Contact: shankar.sharma2005@gmail.com. This is a paper sent to the Reserve Bank of India governor, along with a representation, arguing that a higher push for GDP growth has grave implications for environment 


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