Green GDP

Prelims level : Economy Mains level : Inclusive growth and issues arising from it, Conservation, environmental pollution and degradation, environmental impact assessment
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  • Green GDP is a term used generally for expressing GDP after adjusting for environmental damage.


  • The System of National Accounts (SNA) (is the internationally agreed standard set of recommendations on how to compile measures of economic activity), is an accounting framework for measuring the economic activities of production, consumption and accumulation of wealth in an economy during a period of time.
  • When information on economy’s use of the natural environment is integrated into the system of national accounts, it becomes green national accounts or environmental accounting.

The process of environmental accounting involves three steps viz. 

  • Physical accounting;
  • Monetary valuation; and
  • Integration with national Income/wealth Accounts.
    • Physical accounting determines the state of the resources, types, and extent (qualitative and quantitative) in spatial and temporal terms.
    • Monetary valuation is done to determine its tangible and intangible components. Thereafter, the net change in natural resources in monetary terms is integrated into the Gross Domestic Product in order to reach the value of Green GDP.
    • The process envisaged by Ministry of Environment and Forest does not require any change in the core System of National Accounts (SNA), and is achieved by establishing linkages between the two through a system of satellite accounts (called Satellite accounts as it adds new information to core accounts).
    • For example, Environmental Satellite Accounts link measures of emissions, material use, costs of remediation and environmental taxes to measures of economic activity. Satellite accounts are a framework that enables attention to be focused on a certain field or aspect of economic and social life.
    • They are produced in the context of national accounts but are more flexible as they allow concepts, definitions, accounting rules and classifications to be changed, where it improves analysis.
    • An Expert Group was also convened under the direction of Prime Minister by the National Statistical Organization, Ministry of Statistics and Programme Implementation, Government of India in August 2011 to examine the prospects of developing green national accounts in India. The committee was Chaired Shri Partha Dasgupta and submitted its report in March 2013.
    • The report of the Committee Green National Accounts in India: A Framework, opines that the word green GDP is a misnomer as it is about the wealth of the nation that one is referring to (not income) while talking about accretion or depletion of natural resources. The work in coming out with green GDP estimates is progressing.

History of Environmental Accounting in India:

  • A Framework for the Development of Environmental Statistics (FDES) was developed by the Central Statistics Office (CSO) of India in the early 1990s. The Compendium of Environment Statistics is being released since 1997.
  • As per the recommendations of Technical Working Group on Natural Resource Accounting (NRA) in the later 1990s, a pilot project on NRA in the State of Goa was initiated during 1999-2000.
  • Thereafter, resource accounting studies were carried out in 8 states on different set of natural resources. Later a Technical Advisory Committee was constituted in the year 2010 under the Chairmanship of Kirit Parikh to bring out a Synthesis Report combining the findings of all these studies.
  • The report recommended the preparation of a National Accounting Matrix that would include environmental accounts. The High-powered expert group under Partha Dasgupta was constituted subsequently in 2011 with the mandate of developing a framework for green national accounts of India and for preparing a roadmap to implement the framework.
  • Following the guidance of International Organisation of Supreme Audit Institutions (INTOSAI) on the framework for of environmental auditing, the supreme audit institution of India – Comptroller and Auditor General of India (CAG) also conducts environmental audit in India.
  • This process was formalized with the introduction of specialized guidelines {MSO (Audit) 2002} for conduct of environmental audits. This laid down broad guidelines to enable India’s auditors to examine whether the auditee institutions gave due regard to the efforts of promulgating sustainability development and environmental concerns, where warranted.
  • Thus, in India, Environmental audit is conducted within the broad framework of Compliance Audit and Performance Audit at the central level by the Office of Principal Director of Audit (Scientific Departments) and by the state Accountant Generals (Audit) at the state level. Over the years, more and more states have taken up environmental audits.
  • These compliance as well as performance audits have been printed in the respective state/ central audit reports and presented to Legislature/Parliament.
  • All these reports deal with the environment themes of water issues, air pollution, waste, biodiversity and environment management systems. 
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