The issue of India’s economic growth versus emissions Premium

Policies and measures in India that support renewable energy, emission mitigation, and sustainable development will be key in ensuring that economic growth and environmental preservation can coexist

The Indian economy has consistently showcased its robust growth over the past few decades. But higher economic growth is believed to have come with increasing environmental pressure, notably through higher greenhouse gas (GHG) emissions. However, India’s Economic Survey (2023-24) claims that India has decoupled its economic growth from GHG emissions, as between 2005 and 2019, India’s GDP grew at a compound annual growth rate (CAGR) of 7%, while emissions rose at a CAGR of just 4%. This raises a crucial question: has India really decoupled its economic growth from GHG emissions? And, what does this mean for sustainable development?

Decoupling refers to breaking the link between economic growth and environmental degradation. Historically, economic growth is found to be positively related with environmental degradation, as this growth is believed to be a driver of GHG emissions. However, with the growing climate crisis, the imperative to reduce emissions while ensuring continued economic growth has gained global traction.

Decoupling has largely been classified into two types: absolute decoupling and relative decoupling. Absolute decoupling occurs when the economy grows, while emissions decrease. This is the ideal form of decoupling, where countries grow economically without increasing environmental harm. However, relative decoupling happens when both GDP and emissions grow, but the rate of GDP growth surpasses the rate of emissions growth. While this signifies progress, at the same time, it acknowledges that emissions continue to rise.

Decoupling of economic growth and GHG emissions is important. On one hand, it offers a path to sustainable growth and development, a way for nations to grow and improve living standards without exacerbating climate change. On the other, it comes as a response to rising demand for degrowth and sparks the ongoing debate between green growth and degrowth. Proponents of green growth argue that it is possible to maintain or even increase economic growth while reducing environmental harm. In contrast, degrowth advocates suggest that economic growth itself is the primary driver of ecological degradation and should be curbed in favour of reducing resource consumption. But proponents of degrowth overlook the fact that countries, in addition to tackling rising GHG emissions and the climate change, are also required to tackle low standards of living, energy poverty and ensure a decent life, which could be taken care of through economic growth.

The claim of India’s decoupling made in the Economic Survey comes from comparing GDP and emissions growth rates between 2005 and 2019. The Survey does not specify whether this represents absolute or relative decoupling. Using various decoupling indicators discussed in OECD (2002), we examine the status of the economy-wide and sector-wise decoupling status for India. Since the 1990s, with significant trade liberalisation, India has been experiencing steady and stable economic growth. Hence, we are examining how GDP and emission generation are growing in India with respect to the levels of 1990. While there has been no absolute decoupling in India, since 1990, GDP in India has grown at a much higher pace than the GHG emissions in the country, indicating economy-wide relative decoupling. Since, the agriculture and manufacturing sectors are among the major contributors of emission generation in India, it is also important to understand whether these sectors have also achieved decoupling or not, which has been assessed by comparing rate of growth of GVA of the respective sector with the rate of growth of GHGs emitted by the sector. From 1990, India’s GDP has grown six-fold, while GHG emissions have only tripled.

From the data, it seems that India may have achieved relative decoupling, where emissions are still rising but at a slower pace than the economy. This achievement, while commendable, falls short of the ultimate goal of absolute decoupling, where economic growth can continue even as emissions fall. While most countries fall short of achieving absolute decoupling and still experience rising emissions as GDP increases, many countries have at least managed to achieve a declining rate of growth of emissions. Given that India is a developing country which has not even peaked its emissions yet, emissions are expected to increase with economic growth. Hence, achieving absolute decoupling is not going to happen anytime soon. While India’s relative decoupling is a step in the right direction, the path to absolute decoupling is still a long and complex journey. Efforts must still be taken and it will be a significant challenge. This remains a necessary target if India is to meet its long-term climate commitments. Policies and measures that support renewable energy, emission mitigation, and sustainable development will be crucial in ensuring that economic growth and environmental preservation can coexist, ensuring a prosperous and sustainable future for India.

Badri Narayanan Gopalakrishnan is Visiting Senior Fellow, Centre for Social and Economic Progress (CSEP). Shifali Goyal is Research Associate, Centre for Social and Economic Progress (CSEP). The views expressed are personal