Globalist Perspective

Is India’s Economic Growth Sustainable?

Do traditional measures of economic growth and progress emperil the sustainable use of our natural resources?

Credit: Jesse KuneShutterstock.com

Takeaways


  • Introducing a different paradigm that seeks to arrest, slow down or freeze growth to address sustainability will require nothing short of a revolution.
  • Social inclusiveness and ecological sustainability will be properly prioritized only when economic growth ceases to be a proxy for development or progress.
  • Rural India relies on women to collect and burn vast amounts of carbon-based fuels. This is possible because the opportunity cost of "female energy" remains negligible.
  • GDP is a poor measure of a nation's well being. Even Simon Kuznets, who devised the national accounts from which GDP evolved, understood this.
  • Emerging market growth is far more rapid than that of the now-developed world in the 18th and 19th centuries, in part because it involves two-thirds of the global population.

Belief in economic growth has come to be seen as a solution for all India’s social and political problems, including poverty, social exclusion and environmental degradation. This also explains why the economic growth rate is the only indicator of progress to which all Indian politicians — even on the political fringes — pay homage.

India’s reluctance to slow down growth in order to pursue sustainability or inclusiveness is not irrational. The trauma of passage from a predominantly religious, feudal society to a more secular, egalitarian and industrial one requires the country to have an optimistic view of the future.

The belief that growing wealth and technological sophistication will guarantee power and prestige provides this dose of optimism. If India is asked to consider the cost of growth in environmental degradation and social exclusion, it is likely to respond that more growth and more technology are the solution.

However, the Indian Government’s optimistic view of economic growth as a means to social inclusiveness, providing dignity and a decent quality of life for all, and ecological sustainability, is flawed.

At the same time, the Western idea of sustainable development is equally untenable. It endorses the false promise that an expanding economy can be fully compatible with environmental sustainability.

In my view, the values of social inclusiveness and ecological sustainability will be properly prioritized only when economic growth ceases to be a proxy for development or progress.

Alternative indicators — such as the Genuine Progress Indicator developed in 1994 by Clifford Cobb, or Green GDP, which was formulated in the 1990s as a response to the inadequacy of GDP — have not yet taken root. Additionally, bringing about a change of values in a large underdeveloped nation is a complex, though not impossible, task.

The starting point for any successful alternative definitions of growth and progress is that they cannot be exclusively applied to developing and poor nations. This must be an inclusive, globe-spanning endeavor.

In 1987, the United Nations’ Brundtland Report defined sustainable development as a process that “fulfils the needs of the present without compromising the ability of future generations to meet their own needs.”

The emphasis of intergenerational equity over interregional equity is instructive as the lives of future generations, presumably in rich countries, was portrayed as being more important than the present lives of the poor.

In both the developmental and environmental camps, the concept of sustainable development was seen a means of achieving development without degradation. Two decades later, it has become a convenient slogan behind which countries like India can conceal “business as usual” growth policies.

Despite India’s rapid growth, over 33% of its households still have no access to electricity — and over 70% still use fuel-wood, twigs and animal dung for cooking. In 2011, non-commercial energy comprised 24% of India’s primary energy pie, following coal at 42%.

Additionally, India’s rural communities rely on female labor to collect and burn vast amounts of carbon-based fuels. This is possible because the opportunity cost of “female energy” remains negligible as long as the women are uneducated and unskilled.

Another key factor little appreciated outside India is the way in which the “poor” actually subsidize the consumption and therefore the pollution caused by the “rich.” This becomes very clear as soon we consider the emission of greenhouse gases in the proper manner.

The world at large lauds India for its low levels of per capita energy consumption. And indeed, carbon emissions per person are 1.5 tons, which is one-third of the global average and less than one-tenth that of the largest emitters in the world.

However, these low per capita consumption figures conceal a painful reality: that hundreds of millions of Indians remain without access to electricity.

On the other hand, upper and upper-middle class Indians living in cities consume very high levels of energy. These high levels are exaggerated by the fact that many upper-income Indians use back-up generators to supplement the unreliable electricity supply in many parts of the country.

Thus, the low energy consumption by a large number of the poor conceals the high consumption levels of the rich by bringing down the average figures.

A measure of the true challenges ahead becomes clear when one considers what is required in terms of power production in order to provide an acceptable level of electricity to the people. The United Nations has established a standard of 1,000 KWh per person as the minimum necessary for an acceptable quality of life.

In India’s case, that means that the country’s power-generating capacity would have to be increased three to four times its current level — even thought the country is already one of the world’s largest energy consumers in the aggregate.

Inconvenient facts like these put paid to the slow — indeed glacial — rate of progress in the international debate about sustainability, growth and the environment.

Rethinking sustainable development

The idea that we need a more socially inclusive and ecologically sustainable model for development has been around for a long time. The ways and means to achieve this are widely discussed. Inclusive development requires employment policies that can bring about a different primary income distribution.

Sustainable growth, for its part, requires the creation of productive assets that conserve nonrenewable resources such as land, water and atmosphere and minimize environmental damage.

These assets have to serve the ultimate goal of human well-being (housing, sanitation, food, water and energy) and also facilitate wealth creation (economic activity).

The question that needs to be asked is not whether a new model is needed, but why the models that have been proposed are failing to make even a marginal impact on the current growth model.

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The perceived link between well-being and growth will not be easy to break. As things stand, growth is the underlying basis of the advancement of social equality. It is also seen as the precondition for civil coexistence and governance.

Indeed, introducing a different paradigm that seeks to arrest, slow down or freeze growth to address sustainability will require nothing short of a revolution.

We have known for long that GDP is a poor measure of a nation’s well being. Even Simon Kuznets, who was the first to devise the national accounts from which GDP evolved, was fully aware of that fact as far back as 1962.

Kuznets warned that distinctions between quantity and quality of growth, its costs and returns, and the short and the long run, were important. And he wrote presciently, “Goals for ‘more’ growth should specify more growth of what and for what.”

He was also very much aware that the simplicity of GDP was prone to misuse:

The valuable capacity of the human mind to simplify complex situations in a compact characterization becomes dangerous when not controlled in terms of definitely stated criteria. With quantitative measurements especially the definiteness of the result suggests, often misleadingly, a precision and simplicity in the outlines of the object measured.…

Measurements of national income are subject to this type of illusion and resulting abuse, especially since they deal with matters that are the centre of conflict of opposing social groups where the effectiveness of the argument is often contingent upon oversimplification.

While a new measure of a nation’s well-being is difficult to design without wide consultation, it is possible to point out some characteristics that the new measure should possess:

1. The indicator should address human security — rather than national security.

We urgently need to recognize that human security must not remain limited to a concern with weapons. It concerns human life and dignity.

At the same time, as long as “nations” are the primary target for policy action, India’s — or any other country’s — focus on “national interest” cannot be contested.

This has an unfortunate effect on climate change policy. To date, it is fundamentally constructed through the twin lenses of national security and national economic strategy. For better or for worse, the “nation” remains the policymaking framework that legitimizes all others.

2. The newly devised measure should take note of limits to growth.

The rate of growth in emerging economies is now far more rapid than that of the now-developed world in the 18th and 19th centuries. It is far greater, in part, because it involves more than two-thirds of the global population.

This means greater strain on natural capital. We have no precedent for managing such scales of growth under conditions of natural resource scarcity.

Given these fundamental dynamics, the current climate discourse seeks to solve the problem in a framework that assumes the need for abundance. It also blindly postulates that technology will enable it to be sustained. Neither of these is supported by available evidence.

3. The new measure should prioritize the production of public goods over the production of private goods.

Economic growth under market-oriented policies is focused on the production of private goods through the efficient allocation of resources with minimal intervention beyond the legal infrastructure. It shies away from the provision of public goods such as social inclusiveness and environmental integrity.

The International Task Force on Global Public Goods (GPG) has explored the concept of GPG to clarify the definition and to propose policy recommendations.

In assessing how it could be harnessed to reduce poverty and enhance welfare, the task force prioritized peace and security, trade regimes, financial stability, control of communicable diseases and sustainable management of the national commons.

Measuring production of global public goods in such a framework, rather than worshipping GDP (which is both gross and domestic), would be a step in the right direction.

The world simply cannot wait any longer and must begin to measure the production of these public goods with the same fervor, rigor and excitement as we have long witnessed with the production of private goods — by GDP.

We would measure nothing short of the production of progress and sustainability itself — in categories such as peace, equity, environmental integrity and knowledge.

Editor’s note: This essay was adapted from the author’s presentation at the 2012 Salzburg Trilogue. Hosted by the Bertelsmann Stiftung in Germany, the Salzburg Trilogue facilitates international cultural dialogue by bringing together recognized public figures to consider matters of global importance.

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About Lydia Powell

Lydia Powell is the head of the Observer Research Foundation’s Centre for Resources Management.

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