Ask an economist whether India is doing well and you’ll get a number: the growth rate, the size of the economy, a position on some global league table. It’s a tidy answer, but an incomplete one. GDP measures how much we produced this year. It doesn’t tell us whether we ended the year with more or less than we started with. A shopkeeper who quietly sells off his stock and records the cash as profit wouldn’t be called successful. A country can do a version of this without anyone noticing, because the books aren’t set up to catch it.
There is a measure that tries to fix the books. The Inclusive Wealth Index (IWI) doesn’t track a yearly flow of output. It adds up natural capital such as forests, minerals, and ecosystems; human capital including education and health; and produced capital like infrastructure and machinery. The latest edition assessed 163 countries between 1990 and 2019. For India, the picture was uneven. Physical capital rose steadily and human capital stayed relatively stable from 2000 to 2019, while natural capital declined. None of this is brand new: an early pilot of the index found that India’s natural capital had dropped 31%, which left its overall inclusive wealth up only 9%. The headline growth and the real gain were two very different stories.
Groundwater is where it gets complicated, and I’d rather be fair about it. Recharge has risen since 2017, and the share of over-exploited assessment units has fallen from 17.2% to about 11%. Nationally, extraction stands at roughly 60% of the extractable resource, which isn’t a crisis number. But averages are a polite way of hiding geography. In its 2023 assessment, Rajasthan was extracting nearly 149% of its extractable resource. In Haryana, 88 blocks are classed as over-exploited, and the water table has dropped 5.41 metres over the past decade. A farmer in Haryana doesn’t live on the national average.
Forests tell a similar story, only with better packaging. Forest cover is 21.76% of the country, and 25.17% once tree cover outside forests is counted. But look at what actually grew. Of the 1,445 sq km added between 2021 and 2023, only 156 sq km was forest cover, and the other 1,289 sq km was tree cover. Experts have pointed out that the small net gain masks declines in biodiversity-rich regions like the Western Ghats, the Himalayan states, and the Andaman and Nicobar Islands, along with a fall in mangrove cover overall. A row of neem trees on a farm boundary is useful, but it isn’t a rainforest. A balance sheet that treats the two as interchangeable is flattering itself.
There’s a deeper problem underneath. Official environmental accounts for forests value timber and other forest products at only about 0.16% of GDP. Water regulation, soil protection, and habitat don’t show up in a figure like that. When the economy’s own yardstick sees so little of what a forest does, losing one barely registers.
Fisheries show how contested all of this is. An official assessment of marine stocks reports that 91.1% of the stocks it assessed are in a healthy state. Yet the same body of research puts the national average biomass at 0.86 of the level that supports maximum sustainable yield, which its authors treat as a strong reason to manage fisheries better. A separate peer-reviewed study, using a different method, found 36.3% of assessed stocks overfished, with the northwest coast in the worst shape. I’m not here to settle which one is right. The point is that we count fish far less carefully than we count rupees.
The usual defence of all this goes something like: nature can be run down, because healthier and better-educated people will make up the difference. It isn’t a silly argument. Human capital is the largest component of global inclusive wealth, at over half in 2019. But the offset only works if human capital is being built, and here the evidence is mixed. A national rural survey found that 23.4% of Class 3 children in government schools could read a Class 2 text in 2024, up from 16.3% in 2022. That’s a genuine recovery, and it’s still fewer than one child in four. The same survey found that about two-thirds of Class 3 children struggled with simple subtraction. If the compensation is going to come from classrooms, it’s arriving slowly.
So is India richer or just busier? I don’t think the honest answer is “poorer”. Produced capital is real, and some trends, like groundwater recharge and the recovery in reading, are moving the right way. But the question isn’t whether we’re building. It’s whether we’re adding assets faster than we’re using up the ones that can’t easily be rebuilt. A highway can be repaved. An aquifer that has turned saline, or a forest that has been broken into fragments, doesn’t come back on a project timeline.
What would help is dull and practical: publishing natural and human capital accounts alongside the GDP release, every year, with the same prominence. The groundwork has started, since forest accounts already exist. Until those numbers get the same airtime as the growth rate, we’ll keep celebrating the revenue while ignoring the balance sheet.
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