IAS Exam:Green Budgeting in India

Green Budgeting is a relatively new concept in India and in the long term it will evole in a better way in considering all the aspects into the copmputing of Greem GDP.

Updated: Apr 8, 2016 17:49 IST

Relevance of the Topic for UPSC IAS Exam

IAS Main Exam General Studies Paper III: Government Budgeting, Inclusive Growth and Related Growth; Environment Pollution and degradation; Environmental Impact Assessment, Conservation.

Practice Question for Students:

1.    What do you mean by Green Budget? Discuss its implication in India and do you think that green budget can help in solving the problem of climate change.


Economy is one of the largest section of IAS Prelims as well as IAS Main Exam. Budget is a very important psrt of the IAS Prelims as well as IAS Main Exam. At the same time Environmental concerns are increasing year after year and hence the Green Computing is increasinly beoming important. Every year government presents the Budget for future aspiration of country. With the increasing concern towards sustainable environment from the world fraternity, the countries worldwide have started the process of Green budget. The green budget is one area where governments can influence human’s interaction with the environment by discouraging environmental destruction, and encouraging beneficial behavior. Through this process, the coalition of national conservation organizations and environmental group identifies some of the programs to be included in the Green Budget. This budget displays how the central funding for conservation can help, such as:

•    To meet the environmental and climatic challenges of a changing climate,

•    Sustain our nation’s natural resources like lands, waters etc, and

•    Develop our clean energy resources.

Green Budget or Green Accounting is one of the types of accounting tries to include all factoral environmental costs into the financial results of operations. It is been debated and argued that gross domestic product (GDP) ignores the environmental loss and degradation while calculating it, and therefore policymakers and government need a revised model that incorporates them through green accounting.

The main idea of having the green accounting is to help understand the advantages of achieving traditional and desired economics goals in respect with environmental goals. It also increases the related information which is available for analyzing key policy issues, especially when those vital and important pieces of information are often overlooked left unrecognized. The Green accounting/budgeting helps to promote a sustainable future for businesses as it brings green research and development and green public procurement into the big picture. Penalties and fines for polluters and incentives (such as tax breaks, polluting permits, Green points etc.) are also a major crucial part of this type of accounting.

Why it’s Important?

Green budget gives us the assurance that not only the present but the future generations are also hazard free and safe. It gives us a sense of satisfaction that we not only care for the people, but for all the living beings, natural resources, flora and fauna etc. Hence making budget green is not only about how much fund is allotted for wildlife or forest protection. It is about integrating them into every aspect of our economy and to ensure that there is no wasteful and undesired use of natural resources.

For many past years, green issues in India are either hastily added or overlooked in FM’s budget speech. But this year FM Arun Jaitley seems to have done better, but there are still miles to go to ensure that there is full integration of all the green concerns into every aspects of the economy or just to get a recognition by our ministers that investing and protecting the environment is good for the economy.

In today’s world when many countries are on the verge of facing the wrath of nature with a possible climate change impact, India is also one of those countries. India is considered one of the most vulnerable countries with various climate change hazards like floods, drought, landslide, sea-level rise. In such scenario climate change will have a negative and disastrous impact on food security, farming, forests, water resources, marine biodiversity, and coastal areas and coastal livelihoods, and health cam effect Indian people severely. Climate change is said to have a strong influence on the overall economic development of India.

This is when Green Budgeting, an instrument that facilitates Integration of Environmental Policies, can be applied to solve this problem. Generally, Green Budgeting can be understood as a “process in which all the dimensions of sustainable development [ecological balance, social progress and economic growth,] are completely integrated in one single policy that is budget document.” Further, the Green Budget (GB) has the functions to comprehensively and consistently analyse government revenues and expenditures to bring absolute sustainable development. The major importance is given to non-economic targets such as percentage of reduction in carbon emission in a given year that the government expects to reduce.

The Green Budgeting system has its roots in the Green Economy Model and based on the concept of sustainable development. The first and solid impetuses for Green Budgeting came into the Agenda 21 and Brundtland Report that emphasizes the need to `ensure the coherence of economic, social, sectoral, and environmental policies, and plans instruments, including fiscal measures and the budget´. The process of Green budgeting can be also seen as being integrated into the Green Economy as economic development model, which is directly opposed to the current `black´ economy system which relies on fossil fuels. The Green Economy is based on the theory of ecological economics that focuses on the interdependence of human economies and natural ecosystem and the adverse impact of human economic activities on climate change under United Nations Environment Program-UNEP.

India’s Step towards Green Budget

In this year budget, the allocation of around Rs.150 crore has been made for National Afforestation Programme. The attempts have also been to discourage the practice of “dirty coal” by increasing the clean energy cess to Rs.200 from Rs.100 per tonne of coal to finance clean environment initiatives. However, there is not much clarity on how this money will be spend to start the clean environment initiatives as previous funds allocated for the environmental cause too are lying unused and if implemented then through which department of the government.

The announcement to encourage organic farming, the government setting up of a Rs.400 crore fund. A separate programme would be started for sustainable groundwater management. However, the commitments done under the Paris climate summit for conscious transition to a low-carbon economy by India is missing from this year budget.
Apart from a above mentioned initiatives for protecting groundwater, the budget significantly assumes that growth can not happen without these natural resources.

Internationally, a strategy has been created for reallocating investments towards the green economy, which initially may lead to slower potential economic growth rate for a few years, as renewable natural resources are replenished (an effect that can be strong in some sectors, such as fisheries), but in the long run it will result into faster economic growth. The UNEP report on Green Economy also underlines other various benefits for the economy as it leads to reduction in the risks of adverse negative events associated with climate change, water scarcity and energy shocks while creating increased employment.

Why investment in Natural Resources?

There are various advantages associated with the investment made for natural resources. For example, the Center for International Forestry Research (CIFR) estimates that families living around forests or in forest earn an average of one-fourth to one-fifth of their income from forest-based resources. According to Food and Agriculture Organization (FAO) estimates in 2005 that the value of extracted non-timber forest products from worldwide forests amounted to $18.5 billion. In India along with many countries, local economies and livelihoods are thrived by non-timber forest products although their role is understated.

Way ahead:

Government should not merely proposed some law and consider it done. But efficient implementation of the laws is equally important. Further government can create a Green Protection Fund (GPF) which could be used to protect existing wildlife, front-line forest protection force with better equipped, forest belts, free flowing of rivers without garbage and sludge, and better biodiversity protection.

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