The need of the hour is to do away with traditional accounting methods like GDP calculation and move towards more comprehensive methods that accounts for Natural Capital and Ecosystem Services as well to establish link between economy and environment. In this context, discuss the initiatives taken by India.

Natural capital and Ecosystem services (NC&EC) refers to value stored in land, water, forest, and other natural resources, e.g. Forest – provisioning food, shelter, disaster resilience, etc.

Accounting for natural capital and ecosystem services is crucial for realizing their importance, as well as understanding the economic link of environment with economy:

  1. Accounting in GDP – By assigning monetary value to NC&ES, accounting in GDP becomes possible.
    • E.g. India loses billions of dollars to deforestation-induced disaster losses every year.
  2. Promoting conservation efforts – Lack of investments in environmental friendly technologies can be connected via NC & ES accounting.
    • E.g. high initial investment in R&D in solar, but accounting for GHGs emissions, makes it cheaper than thermal.
  3. Identify priority areas and regions.
    • E.g. Renewable energy, inland waterways, etc are environment friendly and hence economically viable.
  4. Balanced regional development through active stakeholder involvement.
    • E.g. Uttarakhand’s green budget.
  5. Innovative financing measures revised to realize the harmonious linkage, based on accounting.
    • E.g. Payment of ecosystem services to help incentivize upstream state’s conservation efforts.

India’s initiatives towards accounting NC&ES:

  • NCAVES (Natural Capital Accounting and Valuation of Ecosystem Services) project, provide tools and methods to correctly account for ecosystem services.
  • Forest & green cover is a criterion under horizontal devolution to states by finance commission.
  • States are adopting green budget to account for NC&ES, e.g. Uttarakhand.
  • Institutions and think-tanks like Niti Aayog, conduct regular studies on ecosystem services and their economic benefits.
  • Financial measures like GST compensation cess, Coal tax, carbon credits exist.

It is time for countries to shift from GDP to a more comprehensive instrument of development measurement accounting for NC&ES, for a sustainable & lasting growth.


Leave a Reply

Your email address will not be published. Required fields are marked *