Economic growth has been used with other terms such as development, modernization, westernization and industrialization. It is, in other words, a transition from a simple, low-income economy to a modern, high- income economy. Its scope includes the process and policies by which a nation improves the economic, political, and social well-being of its people. Though it is often measured by rate of change of gross domestic product, it is generally understood in terms of increase in per capita income, and attainment of a standard of living equivalent to that of industrialized countries.
Economic growth implies a change in the way goods and services are produced, not merely an increase in production achieved using the old methods of production on a wider scale. It also involves improvements in a variety of indicators such as literacy rates, life expectancy, and poverty rates. In addition to increasing private incomes, economic growth also generates additional resources that can be used to improve social services such as healthcare, safe drinking water etc.
However, the conflict between economic growth and sustainable development is not always necessary. Economic growth does not always contribute to environmental degradation. In the early stages of growth, quality of environment generally deteriorates but at higher levels of per capita income, it improves. The link between income and pollution arises because the composition of output changes with growth in favor of newer, cleaner technologies. Thus, sustained economic growth is the key to sustainable development.
Pollution tends to be related to population, and population growth is inversely related to income growth. Higher average income and output levels are only good for the environment when associated with policies that lessen demographic pressures by reducing personal risk and the need for large families. Also, improvements in the security of employment, education and training, pension policies, social security and the employment of women are especially important in this respect.
Trade is something which leaves an impact on both growth and environment. If trade is distorted by subsidizing fuels that pollute, it would result in environmental pollution. On the other hand, trade liberalization offers a particularly powerful impetus to growth and is entirely compatible with sustainable development. In fact, Sustainable development encompasses growth along dynamically efficient development patterns.
Sustainable development aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for future generations. The Brundtland Commission, which coined the term ‘sustainable development’, defines it as development that “meets the needs of the present without compromising the ability of future generations to meet their own needs.”
Sustainable development does not focus solely on environmental issues and it can be conceptually broken into three constituent parts: environmental sustainability, economic sustainability and sociopolitical sustainability. The United Nations 2005 World Summit Outcome Document refers to the “interdependent and mutually reinforcing pillars” of sustainable development as economic development, social development, and environmental protection. Indigenous peoples have argued that it has a fourth pillar of cultural diversity.
Then there is a concept of ‘economic sustainability’. Agenda 21 emphasizes that broad public participation in decision making is a fundamental prerequisite for achieving sustainable development. Thus sustainability is a process of resolving the conflict between the various competing goals. It involves the simultaneous pursuit of economic prosperity, environmental quality and social equity famously known as three dimensions (triple bottom line) with is the resultant vector being technology, hence it is a continually evolving process.
A relatively new term is ‘Green development’, which is generally differentiated from sustainable development in that Green development prioritizes environmental sustainability over economic and cultural considerations. There are other views that consider environmental and social challenges as opportunities for development action. This is particularly true in the concept of sustainable enterprise that frames these global needs as opportunities for private enterprise to provide innovative and entrepreneurial solutions. This view is now being taught at many business schools in the West.
Sustainable development is said to set limits on the developing world. It is being argued, while current first world countries polluted significantly during their development, the same countries encourage third world countries to reduce pollution, which sometimes impedes growth. Sustainability requires that human activity only uses nature’s resources at a rate at which they can be replenished naturally. Theoretically, the long-term result of environmental degradation is the inability to sustain human life. Such degradation on a global scale could imply extinction for humanity.
In the Indian context, infrastructure development is critical for sustainable growth. It is often noted that poor infrastructure—a lack of water and sanitation, shoddy roads, and unpredictable energy supply- constrains foreign direct investment and overall economic potential. A key issue is of attracting private investors willing to participate in infrastructure projects given their complex and risky nature.
Cases of corruption and political and economic risk make investors hesitate. In such a situation, infrastructure financing with transparency and efficiency in mind may do more for India than would be obvious. Hence, a new approach is needed in financing infrastructure to properly cultivate this form of social investment which yields more benefits beyond the infrastructure project itself.
There is a need for government to re-think how infrastructure’s role interacts with other areas that impact firms’ decisions to invest such as bureaucracy, corruption, and macroeconomic stability. There arises the need to reconcile existing infrastructure financing approaches with India’s desire for better governance and a more attractive business climate for private investment.
Given the vast infrastructure needs in India, a progressive approach is needed that levels the playing field, deters political and policy risk, and develops more efficient, transparent market mechanisms. If there is to be real progress toward development goals and reduced poverty, this modernization of approaches offers a way forward.
In addition to physical infrastructure, India has a solid foundation in “soft” infrastructure. A reliable banking system, functional capital markets, a well-developed legal system, and educational opportunities underpins India’s political and economic life. The appearance of many diverse stakeholders’ foreign investors, governments, and domestic investors and consumers can further catalyze the reforms needed to infuse additional private sector activity.
Individual and institutional investors alike can have new choices available in social investment. Parts of the vicious cycle of infrastructure project finance can be turned more virtuous, supporting ends beyond simply funding the infrastructure project itself. Thus, infrastructure challenged India represents a fertile opportunity for a new approach that would attract needed financial resources for sustainable development and allow even greater participation in the global economy.