Development not at the cost of nature

Does development conflict with the environment? There is a widespread belief that it is so. This explains why there is a constant refrain from some economists and policymakers about the rigid environmental laws of the country stalling ‘development’ projects like industrial corridors, highways and other infrastructure projects. However, the problem actually stems from the way we continue to define development — as an increase in per capita Gross Domestic Product (GDP). Although our conception of what constitutes development has clearly undergone changes in the last few decades, yet the GDP measure continues to be the most popular among policymakers, primarily because it is easy to quantify GDP.

The problem with the GDP is that it is a measure of the production of only those goods and services for which a market exists and a ‘price’ can be attributed. But the environment provides a lot of goods and services, like the air we breathe and ecosystem services, for which there is no market. So, a degradation of these goods and services, say because of deforestation or pollution, is actually a loss to the society but is never captured by the GDP. In fact, activities that directly contribute to environmental degradation, like construction, also directly add up in the GDP. This is not to say that industrial corridors and construction projects are necessarily bad — they generate gainful employment. But there are certain costs to the environment which are never adequately accounted for. In economics, we say that there is a negative externality. As a consequence, the economy ends up producing ‘too much’ of industrial corridors and construction projects — the gains from employment in the short run are outweighed by the losses from environmental degradation in the long run.

Development, on the other hand, moves away from the singular focus on the GDP. Rather, development needs to be understood as a general improvement in the wellbeing of people, of which incomes or per capita GDP are an important but not the exclusive component. As Amartya Sen and Jean Dreze point out in their book An Uncertain Glory, development also includes the right to a clean and green environment, and that too from an intergenerational equity perspective. A clean and green environment is also important for a healthy workforce. As soon as we introduce this perspective to development, it readily becomes evident that development and environment can never be at loggerheads with each other. Rather, the two must work together. Any project that seeks to bring in economic benefits, say job creation or value addition, needs to weigh in the associated costs to the environment. Only when the benefits outweigh all the costs (including the environmental costs) should the project go through.

This new approach, therefore, calls for three important steps. First, development planning by policymakers need to internalise the environmental concerns. Second, existing tools for quantifying environmental costs, such as Environmental Impact Assessment (EIA) and green accounting standards, need to be developed further and made more user-friendly. Third, a renewed focus on interdisciplinary courses on environment, economics, accounting and development is urgently needed.

The author is a research scholar at Delhi School of Economics