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New order: India ranks sixth in inclusive wealth index

Darryl D`Monte / Rio De Janeiro Jun 20, 2012

A new measure of ‘inclusive wealth’ which stretches beyond Gross Domestic Product (GDP) and the Human Development Index (HDI) puts India sixth from the top of 20 selected countries, the economic performance of which were assessed between 1990 and 2008.

India’s rise of 4.3 per cent per year in GDP per capita in this period came second only to China, which stood at a high of 9.6 per cent. It also figured next to China in the HDI, with an average 1.4 per cent per head per year. But it came sixth in the Inclusive Wealth Index with 0.9 per cent annually.

The IWI is a more holistic measure which looks at a full range of assets such as manufactured, human and natural capital, which indicates a country’s true wealth and sustainability. The 20 countries together account for almost three-quarters of global GDP in this 20-year period.

This was revealed by the United Nations University and UN development Programme in the run-up to Rio+20, as the three-day environment and development summit beginning tomorrow is known.

Despite registering GDP growth, China, the US, South Africa and Brazil were shown to have significantly eroded their natural capital base. This embraces both renewable and non-renewable resources, such as fossil fuels, forests and fisheries.

Natural resources per capita declined by 20 per cent in the US and 17 per cent in China. Of the 20 countries surveyed, only Japan did not see a fall in its natural capital base, due to a high increase in forest cover.

By GDP alone, China grew by 422 per cent between 1990 and 2008 and the US by 37 per cent. Once the IWI was applied, the corresponding figures fell to 45 per cent and 13 per cent respectively.

“Rio+20 is an opportunity to call time on GDP as a measure of prosperity in the 21st century, and as a barometer of an inclusive Green Economy transition — it is far too silent on major measures of human well-being, namely many social issues and the state of a nation’s natural resources,” said UN Environment Programme Executive Director Achim Steiner.

India is among the high population growth countries, including Nigeria and Saudi Arabia, which have registered significantly lower IWI growth. This negative trend is likely to continue unless measures are taken to increase natural the capital base or reduce population growth.

Six countries — Russia, Venezuela, Saudi Arabia, Colombia, South Africa and Nigeria — faced a decline in their inclusive wealth. The focus on this new measure acquires significance in that Rio+20 emphasises the “Green Economy”.

“It is never a good time to start,” Rachel Kyte, vice president of Sustainable Development told Business Standard. “We have to invent a way out of the economic crisis. Now, good examples are Singapore and South Korea, while cities include Vancouver, London and New York.”

She told journalists that Agenda 21 — the portmanteau of sustainable development policies that were enunciated in Rio in 1992 —“was weak on economics and finance. There was $125 billion a year in overseas development assistance that didn’t happen. This is a totally different world, where there are no longer funds from developed countries to developing countries.

“There is a personal and professional frustration. It is easy to walk out of Rio and say that the world cannot organise itself. But, change is possible. Inclusive green growth is affordable, not a luxury. It is more efficient and effects economies.

“We have to act now and not let the world lock itself for example in infrastructure. For example, Bus Rapid Transit System has huge pay-offs The productivity of the poor will increase by 20 per cent. Green growth is a win-win.”

She cited how 50 companies and 50 countries would be taking a pledge at Rio to introduce natural capital accounting, discarding GDP. “We need to debunk, demystify the green economy.”

“We are in an Earth Emergency. It’s an unbelievable crisis. Policies are the most important tool we have,” said Jakob von Uexkull, who heads the World Future Council. He cited how UNEP alleged that “bad government policies allow 3,000 0f the world’s biggest corporations to escape more than $2.2 trillion in annual damage through their impacts on the environment. If those companies had to account for those costs, few would be profitable.”

The environment also needed legal protection through changes at the International Criminal Court to “criminalise acts that cause irreversible damage to our natural environment,” said Alexandra Wandel, Council Director. Such activities would be considered crimes against future generations.

More than 100 heads of state —including Prime Minister Manmohan Singh — are expected to arrive in Rio, along with some 45,000 people. US President Barack Obama is not coming, but Secretary of State Hillary Clinton is. Several CEOs of companies are also present. The theme is ‘The Future We Want’.

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