1.2 Rational of Integrating Environmental Indicators
in a Social Accounting Matrix
A Social Accounting Matrix (SAM) depicts the entire circular flow of income for an
economy in a (square) matrix format. It shows production leading to the generation
of incomes which, in turn, are allocated to institutional sectors. In addition, it shows
the redistribution of income leading to disposable income of institutional sectors.
These incomes are either spent on products or saved. Expenditures by institutions
lead to production by domestic industries as well as supply from imports (Pradhan
et al. 2006; Pal et al. 2012; Saluja and Yadav 2006). Hence, the advantage of using
a SAM to incorporate both the economic and environmental indicators is that their
interrelations can become more apparent and transparent. Moreover, the environmentally extended SAM (ESAM) follows same principle like a SAM, and hence it
is suitable for multiplier analysis (Keuning 1992). The multiplier derived from an
ESAM would give an understanding about the direct- and indirect-induced impact
of a policy on economic growth as well as on environment. Furthermore, this
ESAM can be applied as a balanced data source for the computable general
equilibrium (CGE) model for environmental policy analysis (Xie 1996). Therefore,
the extension of SAM can be considered as the logical step in the efforts to
simultaneously account for the interrelationship between economic and environmental activity.
1.3 Challenges in Constructing ESAM for India
Economic analysis with the help of environmentally extended social accounting
matrix is popular in Netherlands, Bolivia, Chile, China and UK (Keuning 1992;
Alarcon et al. 1997; Gallardo and Mardones 2013; Xie 1996; Shmelev 2013). In
case of India, the ESAM constructed for the year 2006–07 by Pal and pohit. (2014)
is the first ESAM to describe the conflict between economic activities and GHG
emissions and natural resource depletion. However, this ESAM does not take into
account local pollutants (Carbon monoxide (CO), suspended particulates matters
(SPM), nitrogen dioxide (NO x ), sulphur di oxide (SO 2 ), etc.) in its framework,
whereas these local pollutants determine the domestic air quality and have severe
implications on human health. Moreover, this ESAM has been constructed with
data available from the MoEF for the year 2007 but this data is not available for
every years. On the other hand, data for local pollutant is available for limited
sectors and most of them are not directly matched with the sector of input–output
table published by CSO (TERI 2009; www.mospi.nic.in). Therefore, scarcity of
data poses challenge to construct an ESAM for India with detail account of local
and global pollutants. Hence, our primary objective in this study is to describe in
detail the method of constructing ESAM under a data constraints situation. Since
the latest ESAM available for India is for the year 2006–07 (Pal and pohit. 2014),
The Conflict Between Economy and Environment …
205
in a Social Accounting Matrix
A Social Accounting Matrix (SAM) depicts the entire circular flow of income for an
economy in a (square) matrix format. It shows production leading to the generation
of incomes which, in turn, are allocated to institutional sectors. In addition, it shows
the redistribution of income leading to disposable income of institutional sectors.
These incomes are either spent on products or saved. Expenditures by institutions
lead to production by domestic industries as well as supply from imports (Pradhan
et al. 2006; Pal et al. 2012; Saluja and Yadav 2006). Hence, the advantage of using
a SAM to incorporate both the economic and environmental indicators is that their
interrelations can become more apparent and transparent. Moreover, the environmentally extended SAM (ESAM) follows same principle like a SAM, and hence it
is suitable for multiplier analysis (Keuning 1992). The multiplier derived from an
ESAM would give an understanding about the direct- and indirect-induced impact
of a policy on economic growth as well as on environment. Furthermore, this
ESAM can be applied as a balanced data source for the computable general
equilibrium (CGE) model for environmental policy analysis (Xie 1996). Therefore,
the extension of SAM can be considered as the logical step in the efforts to
simultaneously account for the interrelationship between economic and environmental activity.
1.3 Challenges in Constructing ESAM for India
Economic analysis with the help of environmentally extended social accounting
matrix is popular in Netherlands, Bolivia, Chile, China and UK (Keuning 1992;
Alarcon et al. 1997; Gallardo and Mardones 2013; Xie 1996; Shmelev 2013). In
case of India, the ESAM constructed for the year 2006–07 by Pal and pohit. (2014)
is the first ESAM to describe the conflict between economic activities and GHG
emissions and natural resource depletion. However, this ESAM does not take into
account local pollutants (Carbon monoxide (CO), suspended particulates matters
(SPM), nitrogen dioxide (NO x ), sulphur di oxide (SO 2 ), etc.) in its framework,
whereas these local pollutants determine the domestic air quality and have severe
implications on human health. Moreover, this ESAM has been constructed with
data available from the MoEF for the year 2007 but this data is not available for
every years. On the other hand, data for local pollutant is available for limited
sectors and most of them are not directly matched with the sector of input–output
table published by CSO (TERI 2009; www.mospi.nic.in). Therefore, scarcity of
data poses challenge to construct an ESAM for India with detail account of local
and global pollutants. Hence, our primary objective in this study is to describe in
detail the method of constructing ESAM under a data constraints situation. Since
the latest ESAM available for India is for the year 2006–07 (Pal and pohit. 2014),
The Conflict Between Economy and Environment …
205