ABSTRACT
GDP’s current role poses a number of problems. A major issue is that it interprets every expense as positive and does not distinguish welfare enhancing activity from welfare-reducing activity. Nations, need indicators that measure progress towards achieving their goals – economic, social, and environmental. The traditional measures of investment and saving are relied upon measures based on income. The natural environment is omitted from the accounting algorithm and thus, depreciated physical capital is included, whereas, depletion of environmental resource was excluded. The World Bank attempted to make the inclusion of natural and human capital into the saving measurement, and has developed a measure known as “genuine saving’ which comprises physical, human and natural capital. This paper has calculation of genuine saving rates in India and policy implications of the measures. The paper suggests that Indian approach is needed to appropriately address sustainability issues and to incorporate natural capital in national accounting.
