The environmental cost of economic development in India

By Riya Jain & Priya Chetty on December 4, 2019

Environment is an integral part of every living organism on earth. The environment consists of air, water and vegetation. India’s tryst with economic growth started only in the last three decades, but the country was a powerhouse of economic planning much before that. After independence in 1947, India’s focus was on boosting agricultural growth and creating price stability, but this slowed the country’s growth rate severely. In order to improve economic growth condition, the second five-year plan under Nehru (1956-61) was formulated to focus on industrialization. This economic development plan made no mention of the environmental protection and societal welfare.

By the 1970s it was realized that the environment needs protection. By this time international and national level regulations were framed to regulate the level of toxic particles released to the environment. But environmental protection was not a matter of priority for India. Five consecutive five-year plans were focused on being self-reliant, have technological development, generate employment and increase productivity. This continuous avoidance led to an increase in the level of toxic particle pollutants into India’s environment.

Simultaneously, in another corner of the world, the concept of ‘sustainable development’ was being conceived under the guardianship of the United Nations. By the 1990s sustainable development became one of the biggest debates in international and global forums. It refurbished the idea of development; incorporating the social and environmental status of a country in addition to the economic aspect as the representation of its health. UNDP stated this perspective as ‘sustainable development’.

Development wherein need of present generation are met without compromising with the ability of future generation to meet their needs.

(UNDP, 2019)
UNDP Sustainable Development Goals for Environmental Protection
Figure 1: UNDP sustainable development goals

This was emphasised through their sustainable development goals framework in 2015. It encompassing 17 goals pertaining to social, economic, and environmental growth. It was expected that all countries of the world would adhere to this framework to formulate their environmental and economic development plans. India too adopted the framework with policies like the Graded Response Action Plan and the National Clear Air program. However, these plans are largely independent of its economic growth plans, indicating the lack of India’s attention to the bridge that connects the economy and its environment.

Impact of economic growth on environmental sustenance

India’s economic liberalisation policies of 1991 brought the dawn of a new era in its economic dynamics. With the implementation of the New Economic Policy, manufacturing and industrialisation grew ignorantly, taking India’s GDP growth rate from 5.5% in 1990 to 7.6% in 1995.

The 1991 policy also eased environmental regulations to attract foreign direct investments. It also fuelled a massive rise in urbanisation due to inland migration of people in search of opportunities. As a result, it created increased stress on India’s environment. According to a study by Muthukumara et. Al (2013) India annually incurs an environmental cost of Rs. 3.75 trillion. Although no parallels can be drawn between the inflow of foreign investment and the condition of environmental factors like air and water pollution, these factors are complementary. This is due to the dependence of economic goods production on natural resources.

The relationship between FDI inflows and air pollution

When India’s environmental composition is studied, a constant rise in certain pollutants is observed, particularly for the period 1990-2012. The worst performers were particulate matters (PM), ground-level ozone (O3), Carbon dioxide (CO2), Carbon monoxide (CO), Nitrogen dioxide (NO2), and Sulfur dioxide (SO2). In total all these toxic emissions are represented by Greenhouse gases (GHG) which had increased by a staggering 40% in 2012 compared to the 1990s level. According to the WHO report (Walter, 2019), pollutants are present in the air due to the emission from power generation industries, manufacturing industries, industrial goods industries, and from automobile industries. These emissions not only degrade the air quality but are hazardous for health too. Globally, about 3.6 million deaths are caused every year due to air pollution (Swaniti, 2012).

Figure 2: Trend line for FDI Inflows and Air pollution indicators (Source: World Bank)

The above graph shows the growth in GHG emissions as compared to the growth in FDI inflows. Other GHG emissions like by-product emissions of hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride have also risen consistently. Unlike the pre-liberalised India, the 1991 economic reforms saw an influx of foreign capital in India’s service sector as well, particularly in the telecom and information technology sectors. This was majorly due to the shift of foreign investment towards the service sector. By 1997, the service sector had brought India’s share of total FDI inflows in the world market to 2.2%.

Increasing stress on India’s power generation sector

FDI inflows directed growth in the service sector led to increased urbanization of cities due to inland migration of the population. During this period the population of the cities increased from 223 million in the 1990s, to 460 million in 2018. This increased population created more demand for housing, transportation, water supply, food, and electricity. As a result, the housing sector grew by 2.8% and construction by 6.4%. Furthermore, investment in infrastructure development increased from 4.7% of the GDP to 7.5-8% (Chadchan & Shankar, 2012).

In 2015, India’s cities consumed the lion’s share of the total energy produced. Since most of India’s electricity is produced by thermal power plants, there has been an unprecedented increase in emissions of harmful particles like Nox, So2, SO3, PM, and CO in the air. In total, about 65% of CO2 emissions are from the power-generation sector of India.

Increased automobile usage in urban cities

Another stress-inducing factor for the environment due to urbanisation has been the increased demand for automobiles. In order to fulfil this demand, the production by the automobile sector has increased from 4.2 million units of two-wheelers to 18.4 million units in 2018. This increase in the usage of privately-owned vehicles was responsible for 60% of total GHG emissions in India. A study by Sood, (2012) shows that about 70% of CO, 30-40% of NOx, 50% of HC, 10% of SO2 and 30% of SPM is due to the emissions from private vehicles in the metropolitan cities of India.

The increase in the level of harmful pollutants emissions by power-generation and the automobile industry is mainly due to the lack of treatment technologies. Thermal power plants of India emit about 65% of total C02 emission, but the capacity of treating these emissions is very less. In total, about 23% of the total emission gets treated by their treatment plants. Therefore, the remaining 77% of the toxic particles are released into the atmosphere untreated. However, India has the capacity to treat 40-44% of the total emissions, indicating its unsolicited disregard for the sustainability of such systems.

The relationship between increasing water pollution and FDI

Water pollution refers to the contamination of water due to the presence of toxic particles like faecal coliform, metals, mercury, or even waste materials from manufacturing industries. Mainly these pollutants affect the water temperature, colour, turbidity, pH, conductivity, and oxidation of water. In India, the main contributors to water pollution are household wastewater discharge and open defecation.

About 70-80% of the water provided to domestic areas gets converted into sewage. In the case of industries, 60% of the effluents gets discharged directly to the water bodies without any treatment. Harmful radioactive chemicals and metal particles released into water bodies are responsible for cancer in 1 out of every 100 children in India.

Figure 3: Trend line for FDI Inflows and water pollution indicators (Source: MINARS & World Bank)

The above figure shows that with an increase in FDI inflows, water pollution has decreased for the period of 2002-2017. After 2014, as the FDI inflows started to fall, indicators of water represented an increase in their level (i.e. temp, conductivity, BOD, and FC). Though currently, the level of dissolved oxygen is higher than the required level but with an increase in discharge of contaminated material and wastewater in the rivers, this level is also decreasing.

This indicates a deviation from the commonly accepted pollution haven hypothesis which states that as developed countries create pollution havens in developing countries by outsourcing their production activities, the level of atmospheric pollution in these havens rise (Eskeland and Harrison, 1997). Why then has the trend not reflected in case of water pollution India?

A report by Stanley states that out of 3226 industries only 2115 industries data in India was available (ICED, 2013). A possible explanation for the presence of an inverse relationship between FDI inflows and water pollution is the limitation of data. This study took into consideration only pollutant levels in major rivers, but other significant water bodies such as sewers, canals, lakes and ponds which account for much of the pollution could not be considered. Moreover, the monitoring stations present at some water bodies, particularly inland water bodies that provide surface water for drinking and irrigation are not monitored for biological oxygen demand (BOD). Instead, they are monitored for 17 other chemical parameters and 14 trace metals. The same is observed for coastal water bodies and public sewers. Moreover, the water samples collected for monitoring purposes were found to be classified as grub samples rather than hourly samples. Grub samples do not reflect the true quality of water since there is a huge variation in the levels of pollution in night and day water (Padma, 2016).

Weak execution of environmental regulations

In spite of the presence of several nationwide environmental protection policies such as the Water (Prevention and Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981, the condition of India’s environment has been degrading consistently for several decades. In 2018, India was ranked 177th in the global Environment Performance Index (EPI).

Many factors are to blame for this, with the most prominent one being flouting of regulatory norms. For instance, rat hole mining is banned in Meghalaya under the National Tribunal Act, however, coal transportation and rat hole mining boomed as recently as 2015. This, along with a shortage of monitoring stations depicts a backlog of proper execution of environmental regulations in India. Delhi being the most polluted city of India had 11 monitoring stations for air quality in 2019. Even after being ordered by the Central Pollution Control Board to build more monitoring stations, no action has been taken.

As cement factories emit a significant amount of harmful toxic particles into the air (Balogun, 2017), the Air (Prevention and Control of Pollution) Act, of 1981 mandates proper monitoring and control mechanisms. However even after this strict regulation, over 30 cement factories were found to openly flout norms in 2019, causing severe distress to the ecology surrounding the facility (Reddy, 2019). Furthermore, under the conservation and management of Dal Lake (2006) program, sewage water treatment plants were to be installed. But during the execution process, the sources of water pollution i.e. discharge of sewage, weed growth, and silt and encroachments depositions were not treated. Thus, despite having effective regulations in place, shoddy execution has mandated that future generations pay a heavy price for environmental degradation.

Lessons need to be learned from Japan’s environmental development

The plight of India’s adherence to environmental protection policies if compared with that of Japan, a country which ranked 20th in the EPI, will offer more clarity in areas for improvement. The primary differentiating factor is that of adherence to law and nationwide execution of policies. The country mainly focuses on the usage of renewable sources of energy, wastewater management, forest management, and biodiversity.

Along with improving regulations, treatment technologies and emission monitoring technologies such as the World Harmonised Transient Cycle to measure emissions show Japan’s commitment towards the environment over the years (WEPA, 2001). Japan followed the path of economic development but simultaneously focused on enhancing the quality of its environment.

A lot can be done to improve India’s standing in the global sustainability platform. High inflation can dissuade industries from installing high-cost treatment plants, therefore the rate of inflation must be under check. Cost-effective treatment plants and an adequate number of monitoring facilities must be present uniformly in the country. The exchange of technologies and knowledge from countries like Japan would provide the incentive to control not only pollution but also cost. The purchasing capacity of households would increase and so would be their standard of living. Thus, the inflow of funds, technology, and knowledge would balance out the economic and environmental growth and could lead India on the way towards sustainable development.