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STRENGTHENING INDICATORS AND ACCOUNTING SYSTEMS FOR NATURAL CAPITAL
ANNEX: COUNTRY-BASED
CALCULATIONS OF GDP OF THE POOR
Box 3.A1: Country GDP of the Poor Calculations – India
Agriculture and allied activities contribute around 16.5% to the GDP, with per capita income of US$ 2,220
(adjusted for purchasing power parity). A large proportion of timber, fuelwood and non-timber forest products
are not recorded in the official GDP, so these were added as adjustments. To these tangible benefits we have
also included the contribution of ecotourism and biodiversity values and ecological services provided by forest
ecosystems, based on estimates from the Green Accounting for Indian States Project (GAISP). The adjusted
contribution of agriculture, forestry and fishing to GDP has increased from 16.5% to 19.6%.
More specifically:
• not all of the contribution of agriculture, forestry and fishing can be attributed to poor people;
• we assumed that fuelwood and NTFPs are totally consumed by the poor;
• for ecotourism, we assumed that with international tourists, there is a leakage of around 40% out of India
and only the remaining 60% is captured by the host country. Of this 60%, part of the income accrues to
the government, tour operators, hotels and restaurants (we assumed 50%) and only the remainder goes
to the local people. For domestic tourists, we also assume that officially recorded revenue is captured by
the formal sector and only the rest accrues to local people;
• for bioprospecting, from a strict ‘equity’ perspective, it can be argued that the entire revenue should be
captured by locals. However, we assume that locals get a royalty of only 25% and that the rest goes
to the bioprospector or to the relevant government and agency. This is a very rough approximation:
in practice, local people may often get considerably less than this (see also the section on Access
and Benefit Sharing in Chapter 5);
• the other ecological services considered are carbon sequestration, flood control, nutrient recycling and
water recharge for which the locals directly benefit (except for carbon).
Based on this, the per capita GDP accruing to the poor (whom we define as population holding less
than 1 hectare of agricultural land, people dependent on forests and the small fishing community)
is 260 US$/year. If this income is deducted from GDP, the per capita income available for the rest of the
community is 435 US$/year. However, if ecosystems are degraded, the cost may not be equal to the benefits
forgone for the following reasons:
• the costs can be higher because if local people try to get the same benefits elsewhere, it costs them
much more (marginal utility of income generated is always lower than marginal disutility from spending
the money);
• the marginal utility of a dollar obtained by a poor person is always higher than that of a rich person;
• the poor do not have any buffer from degradation of ecosystem services in the form of institutions
and financial resources, unlike the rich.
For these reasons, a loss of a dollar would hurt poor people more than a dollar to the rich. We therefore need
to use equity weighting. We have used the ratio of mean per capita expenditure on food of households at the
top of the pyramid to that of the households at the bottom of the pyramid as the equity weight. This data has
been taken from a survey by the World Resources Institute (Hammond et al. 2007).
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 3: PAGE 43