# **I  Introduction**

Economic growth is universally recognized as a prerequisite for development. A strong momentum in investment reflecting rising productivity, healthy corporate profits, and robust exports has fueled a buoyant economic growth exceeding 7% a year in India for almost a decade. Economic growth has increased employment opportunities and allowed millions to emerge from poverty.<sup>3</sup> Economic expansion is also often accompanied by rising demands on the already scarce and often degraded natural resources (soils, fossil fuels, water and forests) and the increasing pollution footprint will negatively impact human health and growth prospects. In India’s case, a remarkable growth record has been clouded by a degrading environment and growing scarcity of natural resources. Mirroring the size and diversity of its economy, environmental risks are wide ranging and are driven by both poverty and prosperity. Environmental sustainability could become the next major economic challenge as India surges along its growth trajectory.

This study provides estimates of social and financial costs of environmental damage in India from three pollution damage categories: (i) urban air pollution, (ii) inadequate water supply, poor sanitation and hygiene, (iii) indoor air pollution; and three natural resource damage categories: (i) agricultural damage from soil salinity, water logging and soil erosion, (ii) rangeland degradation, and (iii) deforestation. The estimates are based on a combination of Indian data from secondary sources and on the transfer of unit costs of pollution from a range of national and international studies (a process known as benefit transfer). Data limitations have prevented estimation of degradation costs at the national level for coastal zones, municipal waste disposal and inadequate industrial and hospital waste management. Furthermore the estimates provided do not account for loss of non-use values (i.e. values people have for natural resources even when they do not use them).

## _Methodology for Valuation of Environmental Damage_

The quantification and monetary valuation of environmental damage involves many scientific disciplines including environmental, physical, biological and health sciences, epidemiology, and environmental economics. Environmental economics relies heavily on other fields within economics, such as econometrics, welfare economics, public economics, and project economics. New techniques and methodologies have been developed in recent decades to better understand and quantify preferences and values of individuals and communities in the context of environmental quality, conservation of natural resources, and environmental health risks. The results from these techniques and methodologies can then be, and often are, utilized by policy makers and stakeholders in the process of setting environmental objectives and priorities. And, because preferences and values are expressed in monetary terms, the results provide some guidance for the allocation of public and private resources across diverse sectors in the course of socio-economic development.

Environmental damage means physical damages that have an origin in the physical environment. Thus, damages to health from air or water pollution are included as well as damages from

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