ANNOUNCEMENTS
Given the trend of dilution of environmental protection norms at the expense of forests in India, the study aims to economically value the forest resources in India to evaluate the sustainability of such policy directions. It does so via the lens of the national accounting architecture leveraging the System of Environmental-Economic Accounting: Ecosystem Accounting (SEEA EA). The research integrates the economic value of the forest resource flows to accurately reflect the state of the forest ecosystem asset and its economic contributions. Accounts are constructed based on the framework for the financial year of 2022-23.
This research focuses on the flows of timber and firewood for the accounting exercise. Physical and monetary accounts were constructed in this regard and were aggregated at the national and zonal levels. The valuation approach involves novel prediction techniques and pricing mechanisms for the accounting components leveraging data from multiple government sources.
The physical accounts reveal a decline of 4.6% in forest cover and a 1.5% decrease in forest volume over the accounting period. The key drivers of physical depletion were logging activities – particularly that of firewood. These results signal resource overuse and inadequate restoration at the national level, threatening long-term sustainability.
The monetary account recorded a 0.04% decrease in the forest ecosystem asset value over the year, which aligns with the results from the physical accounts. The account highlighted the sheer magnitude of the economic importance of forests in India, with the valuation of the closing stock being nearly 9% of the GDP of that year.
At the macro level, two forest-augmented economic indicators were developed to integrate with the system of national accounts – the FGEP and FADP. The FGEP estimate highlighted that the lower bound contributions of the forest ecosystem stood at 0.06% of the GDP. FADP, on the other hand, showcased adjusting for degradation and forest ecosystem benefits in the GDP, which increases its valuation by more than Rs 1,000 crore, highlighting the undervaluation of the contributions of forests in the national income calculation.
Regional patterns show stark contrasts - the southern zone outperformed the others, demonstrating sustainable forest management patterns likely rooted in a greener institutional outlook. In contrast, the eastern zone recorded the most dismal performance, recording the highest losses in area, volume and monetary valuation.
By integrating forest values into the national accounting architecture, this study highlights the need to revisit the traditional methods of measuring economic growth. Forest degradation is not just an environmental concern but a significant erosion of national wealth. These findings call for stronger data systems and greener economic planning to account for ecological sustainability.
