Green Accounting

The measures like Gross Domestic Product (GDP) and Net Domestic Product (NDP) have been the key indicators in economic policy. They have become so much a part of our life that it is hard to remember that they are hardly fifty years old.

They were first published in the United States in the year 1942. These measures are part of the national income accounts developed in each country whose objective is to provide a database for macroeconomic analysis. The aim of national income accounting is to provide an information framework suitable for analyzing the performance of the economic system.

These indicators were for a long time used as a measure of economic progress of an Environment country and also as a measure of standard of living. However, these traditional measures of economic activity (such as GDP and NDP) are now recognized as inadequate as they cannot accurately measure the contribution of environment and the impact of economic activities on environment. The environment, as we all know, is a source of raw materials and energy, serves as assimilator of wastes of production and consumption, provides the context in which all human actions take place and sustains basic life-support systems. Hence, efforts should be made to incorporate environment/natural resources into the national income accounts so as to get a better indicator of economic progress and well-being. 

In the present unit a brief review of the existing system of national income accounts is presented explicitly pointing out the flaws in the system and how the drawbacks or deficiencies in the existing system can be rectified and better indicators of human well-being are constructed.