Download Framework for Green National Accounts in  India Rakesh Kumar Maurya Director

12/11/2013
Framework for Green National Accounts in India
Rakesh Kumar Maurya
Director
2‐12‐2013
Social Statistics Division
Central Statistics Office
National Statistical Organization
Ministry of Statistics & Programme Implementation
New Delhi


Environmental and Natural Resource Accounting in India
p g stage.
g
is in developing
The entire process of Environmental and Natural
Resource Accounting involves 3 steps:
◦ Physical Accounting
◦ Monetary Valuation and
◦ Integration with Economic Accounting.
d tto d
l sector‐wise
t
i uniform
if
th d l
◦ IIn order
develop
methodology
for Natural Resource Accounting, the Ministry
commissioned 8 studies on NRA to specialized
institutes.
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
A Synthesis Report based on 8 studies has since been
prepared under the guidance of a Technical Advisory
Committee (TAC) to recommend sector wise
methodology
for
h d l
f environmentall accounting.

The TAC recommended the preparation of a National
Accounting Matrix that would include environmental
accounts.

Subsequently, in accordance with the direction of Hon’ble
Prime Minister,
Minister an Expert Group under the Chairmanship of
Professor Sir Partha Dasgupta, Emeritus Professor, University
of Cambridge, UK was set up in 2011 to develop a framework
of green national accounts and prepare a roadmap for India to
implement the framework. The Group held three meetings.

The Group submitted its Report in March, 2013.
0 3. An
International Workshop was held during 5‐6 April, 2013 in New
Delhi to discuss the Report. The Workshop was inaugurated
and the Report unveiled by Hon’ble Prime Minister
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
Chapter 2 of the report and its appendices deal with the
conceptual foundations of National Accounts. The conceptual
framework lays out the conditions for sustainability under the
assumption that information is not a serious constraint for
evaluating and aggregating the diverse elements that compose an
economy.

It provides an outline for what would ideally be needed for a
comprehensive set of national accounts.

The Report’s central conclusion is that, adjusting for the
population, the coin on the basis of which economic evaluation
should be conducted is a comprehensive notion of wealth
(adjusted for the distribution of wealth in the economy) and not
on GDP and nor on the adhoc indicators of human well‐being such
as HDI.

In terms of wealth, it can means that “the social value of an
economy’s stock of capital assets, comprising
◦ Reproducible Capital (commonly known as “ manufactured capital”: roads,
ports, cables, building machinery, equipment and so forth)
◦ Human Capital (population size and composition, education, health), and
◦ Natural Capital (ecosystem, land, sub‐soil resources and so on )

In particular, Changes in the circumstances of an economy
should be judged on the basis of their effect on the economy’s
wealth per capita, adjusted for the distribution of wealth.

In other words, wealth per capita tracks intergenerational well‐
being averaged across the generation exactly: the former
increases over a period of time if and only if the latter increase
over that same period of time.
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
“Intergenerational well‐being” means that a numerical index of the
well‐beings of present and future people; and by sustainable
development.

In other words, Economic development is sustained over a period
of time if during the period intergenerational well‐being does not
decline.

Appendix 4 of the report shows that there is a close connection
between intergenerational well‐being and wealth and that shadow
prices provide the link.

Its means that wealth and intergenerational well‐being track one
another: if any brief interval of time wealth increases if and only if
intergenerational well‐being increases. [Proposition 1 of the report]

In other words, an economy’s development is sustainable over any
brief interval of time if and only if its wealth increases over the
interval. [Proposition 2 of the report]

In Appendix 5, the report shows that neither GDP nor HDI
reflects an economy wealth i.e., neither GDP per head nor HDI can
serve effectively in economic evaluation by stating that “Wealth is
the appropriate criterion in both sustainability and policy
analyses.[Proposition 4 of the report]

By considering the wealth per capita as the sustainability and policy
criterion, the Proposition 4 can be restated as “Intergenerational
well‐being averaged over the generations increases over a period of
time if and only if per capita net aggregate investment over the
period is positive”. [Proposition 7 of the report]‐ prove given in the
Appendix 4 (section A 4.5)
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
Proposition 6 hints the possibility that Net Domestic Product
(NDP) is a significant statistic in economic evaluation.

NDP=GDP‐ capital depreciation

That means in a closed economy
NDP =consumption +net aggregate investment (value of net
changes the economy’s capital assets)

Therefore Proposition 2 can be recast as Proposition 8
“I
“Intergeneration
t
ti
well‐being
ll b i
averaged
d over th
the generations
ti
increases over a brief interval of time if and only if aggregate
consumption per capita is less than net domestic product per
capita.

Propositions 7 and 8 embody the ethical significance of net
domestic product.

That means consumption per head must not exceed NDP per head
if development is to be sustainable.

Therefore proposition 2 and 8 reveals the connection between an
economy’s income and capital accounts. Proposition 6 hints the
possibility that Net Domestic Product (NDP) is a significant
statistic in economic evaluation.

NDP=GDP
NDP=GDP‐ capital depreciation
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
In order to measure whether a country is growing sustainably,
Chapter II of the report argued for the need to track changes in
wealth or per capita, where the definition of wealth takes
account of different forms of capital,
capital including natural capital.
capital
Thus, there is sustainable development if net aggregate
investment per capita is positive or, equivalently, net domestic
product per capita exceeds consumption per capita.

The System of National Accounts (SNA) allows us to estimate
these economic aggregates.

There are three economic aggregates that are important for
accounting for the environment:
Net Domestic Product,
Consumption Expenditures and Aggregate Net Investment.

One measure of the ability for a country to grow sustainably is
whether its Net Domestic Product (NDP) per capita exceeds its
consumption per capita on a continual basis.

Net Domestic Product is a standard economic aggregate and is
measured as GDP minus depreciation on a country’s capital.
Depreciation is a business accounting term while in national
accounts the related term is Consumption of Fixed Capital (CFC).

CFC in the existing SNA does not include depletion of environmental
assets
environmental assets.
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




The National Accounts Statistics (NAS) incorporates
environmental goods and services in multiple ways within the
current and accumulation accounts.
While there is a lot to be done in terms of strengthening the
environmental components of the NAS.
GDP does not account for depreciation of natural capital stock as
a result of economic exploitation and environmental
degradation. Details in next slide
In other words, GDP may increase even when the stock of
natural capital
capital, such as minerals
minerals, soils and forests
forests, is being
depleted.
The NDP would more correctly measure these changes in natural
stocks; however, CFC, the measure of depreciation, is currently
not calculated for non‐produced assets such as land, mineral and
other deposits.
Table 1: Environmental goods and services not included in India’s National
Accounts
Environmental Factors and variables
LAND
Land Improvement
Change in Land Use
Depletion/Degradation of land
Status regarding inclusion in NAS
Included in GFCF
Not Included (Data
available)
Not Included
Reasons for non‐inclusion
Data need to be updated in National
Bureau of soil survey (NBSS)
Data need to be updated NBSS
Degradation of Soil
Not Included
Impact of Disasters
Not Included
Non‐availability of complete data
Not Included (Data
available)
Not Included (Data
available)
Updating of data in State Land Use Board
Not Included
(SLUB) will be required
Data available but the same to be
N
l d d
Not IIncluded
disseminated by Registration offices
Updating of data in Directorate of
Not Included
Economics & Statistics at State level will be
required
Included
Included
Land Use, Cover Area, and Yield
use pattern
Productivity of Land
R
i
Reall EEstate prices
Cropping Pattern
Output prices/ revenues
Gross/Net sown area
Soil depth, colour, salinity and drainage (Soil
erosion, run‐off and soil loss under the treated
Not Included
and un‐treated micro‐watersheds, soil loss
prevented by dense forests)
Data need to be updated in NBSS. Data on
soil loss prevented by dense forests are not
available.
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Status regarding inclusion in NAS
Not Included (Data available)
Environmental Factors and variables
Forest
Extraction of minerals in forests
Reasons for non‐inclusion
cover/Forest cover change
Not Included (Data available)
Accumulation of timber due to natural Regular and complete data are not Not Included
regeneration/natural growth
available
Loss in timber volume due to insects, pests and diseases Not Included No data available after 1972
Animal grazing
Not Included
Data not available regularly
Shift in cultivation
Not Included Data available, but more details are required
Carbon stock
Not Included (Data available)
Asset valuation of forest & livestock
Not Included Deforestation
Not Included (Data available)
Land area under forest
Not Included (Data available)
Physical volume of timber
NTFPs
Carbon sequestration potential
Area of Sacred Medicinal Plants
Volume harvested for timber and fuel wood
Included
Included
Not Included Not Included Included
Included
Volume of forest stock affected by forest fire
Included
Area regenerated/Area afforested
Not Included (Data available)
Mangrove cover
Biodiversity
Not Included (Data available)
Not Included Limited data available
Biomass:

Litter

Deadwood

Solid organic carbon (below ground and above ground)/Impact of worms
Not Included (Some data are available)
Environmental Factors and variables
MINERALS
WATER*
AIR
Status regarding inclusion in NAS
Data not available
Data not available
Data not available
Reasons for non‐inclusion
Depletion of Minerals
Not Included (Data available)
Pollutant loads from mining
Not Included Data not available
Surface and ground water quality
Not Included Limited Data available
BOD, COD and SS
Not Included Data generated through primary surveys in case studies need to be updated
Sedimentation in water ways and their treatment costs
Not Included No reliable data available
CO2
SO2
SPM
N2O, Methane, HFCs, SF6
Carbon monoxide
Nitrogen dioxide
Not Included Not Included Not Included Not Included
Not Included Not Included Limited data available
Limited data available
Limited data available
Limited data available
Limited data available
Limited data available
Fuel Consumption
Not Included Data available through ASI, but not on a regular basis
Ozone depleting substance; CFCs, Halgon, CTC
Not Included (Production/consumption data available)
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
The System of Environmental–Economic Accounting (SEEA)
Central Framework is a multi‐purpose framework that describes
the interactions between the economy and the environment, the
stocks and changes in stocks of environmental assets.
assets

Central Framework consists of three parts:
i.
ii.
iii.

physical flows of materials and energy within the economy and between
the economy and the environment;
stocks of environmental assets and changes in these stocks; and
economic activity and transactions related to the environment.
The classification of different environmental assets within SEEA
Central Framework is presented in Table (next slide)
Table : SEEA Central Framework classification of environmental assets
1
1.1
1.2
1.3
1.4
1.5
2
3
4
4.1
4.2
5
5.1
5.2
6
7
7.1
7.2
7.3
Mineral and Energy resources
Oil Resources
Natural gas resources
Coal and peat resources
Non‐metallic mineral resources ((excludingg coal and p
peat resources))
Metallic mineral resources
Land
Soil resources
Timber resources
Cultivated timber resources
Natural timber resources
Aquatic resources
Cultivated aquatic resources
Natural aquatic resources
Other biological resources (excluding timber resources and aquatic
resources)
Water resources
Surface Water
Groundwater
Soil water
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

The Central Framework (SEEA) organizes and integrates the
information of the various stocks and flows of the economy and
the environment in a series of tables and accounts. These tables
and accounts can be linked to relevant employment,
employment
demographic and social information.
The Central Framework(SEEA) comprises the following types of
tables and accounts :
Supply and use tables in physical and monetary terms showing flows of
natural inputs, products and residuals;
Asset accounts for individual environmental assets in physical and monetary
terms showing the stock of environmental assets at the beginning and end
of each accounting period and the changes in the stock;
 A sequence of economic accounts that highlights depletion adjusted
economic aggregates; and
Functional accounts which record transactions and other information about
economic activities undertaken for environmental purposes.

Considering the Indian scenario and SEEA Framework,
Expert Group has recommended that:
1.
Prepare PSUTs and Asset Accounts for (i) land, (ii)forest and timber,
(iii)minerals.
(iii)minerals This can be completed within a year or so.
so
Develop a medium‐term plan (extending to a period of, say, 5 years) that
would include (i) the preparation of Monetary and Supply Use Tables
(MSUT) for land, forest and timber, and minerals for implementing the SEEA
in those sectors; (ii) the development of PSUTs and Asset Accounts for soil,
water, carbon, and energy; and (iii) planning and collecting data for the
purposes of valuing changes in water, carbon, and energy sectors. We note
here that MSUTs for minerals can probably be prepared more quickly than
those for the other sub‐sectors because of the availability of market prices
for minerals and data on extraction costs.
Develop a medium‐term plan for estimating net domestic product (NDP). In
addition to adjusting for depletion of reproducible and the types of natural
capital that were identified in (1)‐(2) above, the move would require
subtracting defensive expenditure on the environment from GDP and
identifying better ways to account for human capital as investment.
2.
3.
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4.
5.
6.
Initiate exploratory research in two areas: (i) the development of a more
complete set of national accounts, including a balance sheet for the
nation; and (ii) the identification of principles for valuing and periodically
collecting and compiling data on environmental assets and flows. This
would culminate in a valuation‐and‐data manual that can be used for
making
to the
ki adjustments
dj
h SNA.
SNA
Develop a long‐term plan (extending, say, to a period of ten years) for (i)
institutionalizing mechanisms for periodic collection of data and for
organizing periodic studies and surveys for environmental accounts; (ii)
collecting and compiling data for valuation and preparation of MSUTs for
aquatic resources, air, and biodiversity.
The Planning Commission could fruitfully put in place a mechanism for
estimating shadow prices and their natural ranges.
 Taking in to account the recommendation of the Expert
Group and the suggestions emerged out of the workshop
held in April 2013, the following steps of implementation
off GNA have
h
been
b
suggested
d for
f
consideration
d
off
National Statistical Commission:
Preparation of Asset Accounts in forest and land on pilot basis.
Preparation of PSUTs for those sub‐sectors of environment
where data readily available. Fairly good amount of related
data already do exist in the Government set up and what is
required is to pool them together for preparation of complete
tables.
3. PSUTs for forest sector and land sector can be taken in the first
instance.
1.
2.
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4.
5.
6.
7.
8.
9.
Dialogue with State/UT Governments even in case of selected
sectors(not a closed list) on which work has to start as the tables to
take care of requirements of State/UTs and also for available of data
with State/UTs.
On issues of additional data needs both central Ministries and
States/UTs to be taken on Board to cope up with the challenges.
Data need assessment to be done for different sectors.
Other Sectors were even physical data are not available may be
taken up later after ensuing data flow and also various related issues
to be worked out.
Planning for converting studies in to a regular data flow system.
Monitoring accounting exercise to be done for those sectors for
which PSUTs are made before this valuation studies are to be
undertaken.
Continuing discussion and dialogue with Central Ministries‐Ministry
of Agriculture(Land and Soil), Department of Animal Husbandry(Live
Stock), Ministry of Water Resources(Water), Ministry of Environment
and Forest(Forest, timber, carbon, bio‐diversity, Air), Ministry of
Mines(Minerals), Central Electricity Authority and Ministry of
Power(Energy) with regard to pooling of existing data available with
them and other sources and for putting in place a system for
collection of new data sets.
10. Consultations with States/UTs in order to take into account their
requirements for Environmental Accounting and also to cope up with
to collection of new data sets.
the challenges
g with regard
g
11. Preparation of action plan for implementation and carrying out
research studies to scale up for national level figures and valuation
purposes.
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THANK YOU
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