Economic Growth and Negative Externalities in India

Abstract

Of late the world has realized that the growth models that believed in growth- environment tradeoff are not sustainable. In the pursuit of increasing their GDP, countries have ignored the negative externalities of growth, which would seriously threaten the survival of the future generation. Two kinds of damage are caused by unsustainable growth. Firstly, productive base, particularly, natural capital, like forest, minerals, energy, is depleting. Secondly, environmental pollution and climate change caused by excessive CO₂ emissions are threatening human lives in terms of deteriorating health conditions and increasing temperature level (OECD, 2012). In the light of these concerns, sustainable development has become an important goal of nations. This study attempts to assess the extent of negative externalities in India and analyze the relationship between negative externalities and growth of GNI. The study finds that the economic growth of India is more sustainable as compared to all income categories countries. Further, the analysis detected a bidirectional relationship between negative externalities and GNI growth in the post-1990s.

Keywords: Negative Externalities, Sustainable Development, and Genuine Saving Rate.

JEL Classification: Q560