INDICATORS OF DEVELOPMENT SUSTAINABILITY

1. By,
DR. Vikas B. Varekar
VEERMATA JIJABAI TECHNOLOGICAL INSTITUTE
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2. COMPOSITION OF NATIONAL
WEALTH
 Economists consider three components of national
wealth:
i)Natural capital
ii)Human capital
iii)Manufactured capital
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3. Contd...
 Human capital- consists of people’s health, knowledge,
skills and motivation, all of which are needed for
productive work.
 Physical/Manufactured capital- physical infrastructure
such as buildings, transport and communications.
 Natural capital- access to key natural resources, such
as water, land, clean air, fisheries, forests etc.
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4. Contd...
 According to World Bank, the most important
component is the human resource, i.e., the number of
people in country’s labour force and human capital.
 Physical and natural capital of a country also plays a
significant role towards its wealth.
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5. Contd...
 A country’s level of development determines the roles
played by the different components of its national
wealth.
 The dominance of human capital is particularly
marked in the most developed countries, where
natural capital is calculated to account for just 2–5
percent of aggregate wealth.
 By contrast, in West Africa—one of the world’s poorest
regions—natural capital still prevails over physical
capital, and the share of human resources is among
the lowest in the world despite a large population.
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6. Fig: composition of national wealth, 1994
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7. ACCUMULATION OF NATIONAL
WEALTH: AN INDICATOR OF
SUSTAINABLE DEVELOPMENT
 World Bank defines sustainable development as “a
process of managing a portfolio of assets to preserve
and enhance the opportunities people face.”
 The assets that this definition refers to include not just
traditionally accounted physical capital, but also
natural and human capital.
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8. Contd...
 Standard measures of wealth accumulation ignore the
depletion of, and damage to, natural resources such as
forests and oil deposits, along with the human
resource invested.
 To overcome this shortcoming, World Bank had
developed a statistical indicator of sustainable
development, “genuine domestic saving rate” or
“genuine domestic investment rate”.
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9. Contd...
 This indicator accounts for negative growth resulting
from depletion and pollution of natural capital.
 It also accounts for positive growth due to
enhancements in human capital resulting primarily
from investments in education and health services.
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10. Fig: calculating the genuine saving rate
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11. Fig: genuine domestic saving rate- estimates for 1998
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12. Contd...
 Estimates show that many of the most resource-
dependent countries, including all the major oil
exporters, have low or negative genuine domestic
savings.
 That means that losses of their national wealth caused
by depletion of natural capital and damage done by
CO2 emissions outweigh the benefits from net
domestic saving and education expenditure.
 The conventional indicators would address such cases
as positive economic growth, though such
development is considered as unsustainable.
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13. Contd...
 On the other hand, the groups of East Asian and high-
income countries appear to be leading the world in the
overall sustainability of their development.
 For such countries, part of their relative
environmental sustainability results from importing
energy and mineral resources instead of depleting
their own.
 This highlights a weakness of the indicator, i.e., its
focus on country level sustainability, while truly
sustainable development can be only global.
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14. THANK YOU
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