Mineral Accounts in India – Towards Environmental Accounting Approach

Abstract

Gross domestic product (GDP) does not account for depreciation of natural capital stock as a result of economic exploitation and environmental degradation. In other words, GDP may increase even when the stock of natural capital, such as minerals, soils and forests, is being depleted. Depletion of natural and human capital is excluded from total national wealth of a nation, and hence, the measures of economic performance are wrong and misleading. Natural resources such as water, soil, air, forest and woodland, minerals are very important to mankind and needed to be explicitly considered both at the macro and micro planning levels. Therefore, the inclusion of the natural environment in national accounts is important as it provides information on the use of natural resources in economic activities. The traditional system of national accounts (SNA) has a number of well-known shortcomings regarding the treatment of the environment. Mining generates income, (which is included in the national accounts and economic indicators like gross domestic product (GDP)), but at the same time, the process of mining depletes national wealth by using up the limited supply of mineral assets. To correct this omission, the 1993 System of National Accounts (SNA) (United Nations 1993), proposed inclusion of minerals as a set of satellite accounts to the SNA in order to provide a more accurate picture of extent to which an economy relies on minerals. Based on the significant contribution of minerals to the development of a developing nation, this paper presents a basic overview of the mining sector in the Indian economy and its accounting prospect to ensure sustainable development in India. To enable proper accounting of mineral wealth in India, we have developed physical accounts for five minerals (bauxite, gold, iron ore, limestone, lead and zinc) in the format suggested by SEEA, 2003. The paper also points towards the direction of developing a concrete methodology for the construction of monetary accounts for minerals in India and rectifying the problem of data lags.