The Rise of Green GDP: Recasting Economic Growth in a Rising Temperature World

Ada Aggarwal
As the world grapples with challenges of climate change, environmental degradation, and increasing economic disparities, one question is increasingly being asked by global policymakers: Is Gross Domestic Product enough? For decades, Gross Domestic Product—our standard indicator of the economic well-being of a nation—has been the measure of all things. But in the reality of today and tomorrow, most economists argue that the traditional indicator has become obsolete. And this leads to the idea of Green GDP—a new and improved version of the economic performance indicator that incorporates the price of the environment.
What is Green GDP?
Green GDP does not just capture production and consumption of goods and services. It incorporates the cost of environmental degradation, e.g., air and water pollution, deforestation, species loss, and carbon emission, by subtracting it from the conventional GDP. That is, it captures the true cost of growth, both economically and environmentally.
Suppose a nation clears a forest in order to construct a road. In the old GDP, constructing the road is credited to the economy. Green GDP, however, subtracts the environmental cost—the loss of forest cover, habitat, and CO₂ sequestration—from the figure. The outcome? A much truer representation of development.
Why Does It Matter?
There has never been a greater urgency for a balanced growth. A 2024 United Nations Environment Programme (UNEP) report says that almost 60% of economic growth between 1990 and 2020 was linked to severe environmental degradation. India, China, and Brazil, even as they have been making fast industrial strides, have also been experiencing rising pollution, falling groundwater levels, and forest cover loss.
“GDP without green accounting is like a bank statement that doesn’t include your loans,” says Dr. Meera Subramanian, policy advisor at India’s NITI Aayog. “It is essential that we not only account for what we produce but also for what we lose in the process.”
In a landmark effort, India released its first Green GDP report in April 2025. While the conventional GDP had a high growth rate of 6.8%, the Green GDP, considering environmental degradation, came down to 5.1%. The reduction of 1.7% might seem insignificant; however, it translates into billions of rupees of lost natural resources and environmental costs.
Countries at the Forefront
While the concept of Green GDP is still in development, Bhutan has been an exemplar for many years. The small Himalayan country is well known for prioritizing Gross National Happiness over GDP, thereby infusing sustainability and well-being into all policy. New Zealand’s, Sweden’s, and
Costa Rica’s nations have also started to integrate environmental indicators into national accounts.
The International Monetary Fund (IMF) and World Bank have also promoted developing nations to adopt the same model. They announced in 2025 that they would provide climate related incentives to countries that include environmental factors in their GDP reporting.
What Does This Mean for India’s Future?
India is at a crossroads today. As one of the world’s fastest-growing economies, it is undergoing
a grand test: balancing industrial growth with environmental awareness. Initiatives such as the National Solar Mission, afforestation campaigns, and incentives on electric vehicles are a step in the right direction. But experts say that unless the prices of environmental degradation are factored into our ideas and indices of growth, all our development will be self-destructive.
“Green GDP shows us what we must know in order to make smart choices,” contends environmental economist Rakesh Malhotra. “It tells us which sectors are actually generating value, and which are simply padding statistics at the cost of our children’s future.”
A New Approach to Thought
Green GDP is not only for policymakers; it is also revolutionizing the education sector. Indian institutions like Delhi University and Ashoka University are integrating sustainability-oriented modules within their economics courses. Students are being taught to quantify economic activity on a triple bottom line: profit, people, and planet.
A New Standard for a New World Where climate concern meets economic aspiration, Green GDP can be more than a number, but a moral and strategic leadership guide. It invites us to look beyond immediate gain and to consider: What are we building? What are we leaving behind? Growth for the sake of growth is no longer growth—it’s a risk. And Green GDP could be the change the world must make in order to flourish, not merely to exist.

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