Structural Transformation and Environmental Pollution : A Study for Indian Economy

Indian economy has been experiencing significant structural change since the inception of economic reforms (July, 1991) and this structural change may be associated with environmental issues as environmental pollution is a byproduct of economic development process in general and of industrialisation in particular. Keeping the fact in mind, in this paper, we have tried to find out the environmental impact of structural transformation of Indian economy. Basically, in this paper, household sector is assumed to have carbon emission and by endogenising the household sector in the Input - Output model, we have tried to capture the implication of carbon emission from household consumption and impact of consumption multiplier on pollution as well. It is observed that most of the production sectors in India over the period 1993-94-2015-16, experience change in the technological process (taking account of direct and indirect effect) such that total carbon intensities become smaller. This is, of course, encouraging as it suggests that the country is moving towards advanced technology with reduced carbon intensities. While decomposing the change in total (direct plus induced) pollution intensity of exports over the period 1993-94-2015-16, into three components namely the ‘effect of change in direct pollution intensity’, the ‘effect of change in production structure’ and the ‘effect of change in export composition’, it is observed that the change in direct pollution intensity and change in technology are reducing the total pollution intensity but the change in export composition is increasing the total pollution intensity when household sector is treated as exogenous as well as endogenised. So it seems that trade composition is to be targeted taking account of the need of growth potential with minimum carbon emission. Besides, it has also been noted that in India, the dominance of consumption multiplier matters for cancelling out the positive pollution impact of the sectors like ‘Electricity’ and ‘Transport’. Again, some exportable commodities may not be directly electricity /transport intensive but inputs in these sectors may be highly electricity/transport intensive. As a result, export and consequently domestic production of these sectors ultimately contributes to carbon emission as transportation and electricity are emission intensive.