SUSTAINABILITY AND GDP: CONVERGING OR DIVERGING? - AN ECONOMETRIC ANALYSIS

Abstract

The normative context suggests that GDP and Sustainability must complement each other as against the positive theory that brings in the confoundment regarding the two aspects being complement to each other. Sustainability is how a particular system remains diverse and productive. It thrives to make the system long lived and healthy. The underlying principle is to enhance the endurance of the existing processes so as to make proper space for the future requirements. Over last few decades, sustainability has promptly become prerogative issue for the economists, policy makers, environmentalists, and corporates. The main challenge in this embryonic arena is to gauge the impact of sustainability on every aspect of our economy. We have seen exceptionally good GDP figures in the recent years. This paper attempts to understand the linkages between GDP, the most common measure of economic growth and sustainability. The 2005 World Summit on Social Development identified three pillars of sustainable development, such as economic development, social development and environmental protection. For the purpose of our study, around 17 variables from these three different clusters have been analyzed using time series analysis and the variables with most significant impact have been considered to construct a robust economic model to understand the impact of these three pillars of sustainability on GDP. This paper concludes by suggesting that National authorities should endeavor to promote the internalization of sustainability costs so as to make GDP a better measure. Our analysis leads us to the conclusion that a self-sufficient and self-explanatory measure is desirable to ensure incorporation of sustainability and consistent growth in order to reflect true well-being of our economy. With the introduction of Green GDP in the current Five Year Plan, it can be expected that this measure fulfils all expectations.