Centre for Development Economics
Department of Economics
Delhi School of Economics
ANNOUNCE A SEMINAR
Substitutability of Natural Capital: State-level Analysis for India
by
(Jindal Global University)
(Thursday, November 21, 2024, at 3:30 PM IST )
Venue: Amex Room
Abstract:-
The Indian economy is experiencing the negative spill overs of economic growth: shrinking natural capital especially with decline in native forests and over-exploitation of subsoil assets. The ‘weak sustainability’ criterion of ‘non-declining capital stock’ implicitly assumes that various types of capital are substitutable with each other. If natural capital is easily substitutable, it does not pose a threat to the continuum of economic production. This paper addresses the question of substitutability of natural capital in India by man-made and human capital. It is the first such study at the state level and the first to look at the substitutability of forest capital with other forms of capital. Employing state-level data on produced capital, human capital and natural capital (agricultural land, forests and non-renewable energy resources) for the period 2001-17 and using two-level nested CES production function approach with three as well as four factors, we find that the joint substitutability of produced-human capital with respect of forests/energy is high. With respect to agricultural land/energy, the joint substitutability of produced/human capital is also found to be high. Our findings are significant in the light of sustainability of growth since these natural resources are not easily replaceable in economic production. While shift to alternative renewable energy and enhancing productivity of agricultural land is possible (although to a limited extent), the loss of native forests is irreversible.