Imagining India

Today is the day of the ‘people’s car’ launch, and its no exaggeration to say that this car is likely to transform the face of India’s traffic, both for better and for worse. The good: If creating widespread access to better services and products is the aim of free markets, then the Nano car is a triumph. It has made the dream of owning an automobile attainable for millions in India. The bad: The car will probably increase overcrowding on roads and pollution. But as long as our cities lack viable mass transit systems, people have no choice but to resort to private vehicles, and poorer Indians should not be denied a choice that the middle and upper classes have had for so long. 

For Indian companies, the Nano is only the most recent success when it comes to making products and services suited to the Indian market.  C. K. Prahalad has written about these low-cost approaches many Indian companies have adopted in his book The fortune at the bottom of the pyramid  - of companies targeting the poorest citizens and turning them into consumers, by selling them two rupee sachets of detergent and shampoo, bringing them internet access through community kiosks, providing loans through Self Help Groups and even providing low-cost health care, such as Arvind Eye Hospital. 

And as we weather the global recession, I think this approach is only going to gain steam - India’s countryside has not been as affected by the recession, and rural India is even showing signs of above-average growth. Hopefully, this will draw our markets into the villages,  help address our long-lamented ‘urban rural divide,’ and do its bit in empowering our rural poor.  

Indians have long admired China’s growth from afar, envying the highways, mass transit systems, airports and entire new metropolises that they manage to build in the time it takes us to get a few flyovers going. 

However, China’s growth does point to many untapped possibilities. In terms of the environment, China has done little more than follow the carbon-intensive growth pattern of the West, one that India has also referred. The consequences of this in a population-heavy country is already apparent in China, since they are ahead of us in the development curve: its cities suffer massive air pollution, such that the sun frequently disappears behind the smog; an entire village vanishes under sludge; the country is facing intense water shortages, and has seen development projects like the Three Gorges Dam turn into environmental catastrophes.

India - another populous country - ought to take our lessons from this. Besides an ‘environment-inclusive’ approach to growth brings with it both advantage and opportunity.  Its undeniable that putting a cost on the environment would have short-term negative effects on the economy, since we would be pricing something that was once free. When policy makers talk about pricing the environment, they usually mean pricing carbon, since carbon is present in the entire cycle - air, water (which absorbs carbon), soil (which can both absorb carbon, and release it when degraded), forests (which absorb carbon in their growth phase).  With carbon prices to consider, industries would have to budget for their factory emissions, for any pollutants that contaminate water, and  degrade land and forests. This would bring down revenues and profits, and slow industry growth. 

But in the longer term, I believe the benefits to GDP growth would be immense, simply because we would be using all of our resources more efficiently. Waste would be managed better, and whole industries will emerge around waste management, recycling and alternative energy use.

Besides, we are already paying for polluting our natural resources - except the cost is being disproportionately paid by the people who have lived closest to nature - the poor, the forest tribals, the farmers. Our farmers struggle with droughts and floods, and falling groundwater tables as well as degraded soil are bringing down harvest yields and income. Declining forests have hurt the livelihoods of the villages and tribes that depend on them. When common water sources are contaminated, its a select few who are able to pay for access to clean water.  Pricing the environment would mean sharing the burden of such pollution more equitably. It would be a shift to a fairer economy, and one with greater accountability. 

Photo credit: Daniel Bachhuber

There is a new change of tone in the already tense negotiations on climate change, if we look at the recent comments the European Commission has directed at India and China. The EC is now pitching for emission caps for both these countries. This is an approach that the Indian government has long said is off the table. Chidambaram has spoken before of India’s ‘right to development’ - that since India is still a developing country and has to address the critical issues of poverty and growth, it has to postpone any commitments to reduce emissions. 

Whether the EC’s tone gets sharper or not, depends on the US position on developing country emissions. I believe though, that India has a chance to set the tone of the emissions debate. So far, we have been backbenchers when it comes to global negotiations on climate change, responding only when we are forced to. But India as an emerging economy, has some precious flexibility when it comes to growth and emissions that both the US and Europe lack. 

As developed nations, both the US and Europe have high emission infrastructure in place as well as ‘high-emission habits’ - in terms of car ownership, consumption, polluting industries and agriculture approaches  - that will be difficult to break or change. India on the other hand, still does not have its infrastructure fully in place. Car ownership is still extremely low, and the high consumption economy is still not in place here. We consequently have a chance to carve a development path that is environmentally safer than the ones that developed nations have pursued. Such an approach ought to be pursued for its own sake, rather than because of external pressures. 

The big mistake of the developed world was in ignoring the impact on the environment during their high growth phase. For writers such as Charles Dickens, the smog of 19th century London- created by coal-burning in the city - was a consant theme in his novels about urban decay. Much of the West never considered that use of the environment ought to be ‘priced’ the same way other resources are. This however, was something that Indian environmentalists such as Anil Agarwal suggested as early as the 1980s, when they noted that GNP ought to be about ‘gross natural product’ rather than ‘gross national product’. With an approach that prices environmental resources, industries would have to pay for dumping untreated waste into our rivers; open coal mines could no longer pollute the surrounding land, turning our soil into unusable sludge. Razing down forests and building a coal-fired plant would have to be ‘compensated’ for, by funding a green project elsewhere. 

Who could such an approach benefit? And how much would it hurt us in our growth numbers? I have some thoughts on this, that I’ll follow up on in a second post.