ROLL No.

- 19BAL116 COURSE CODE- 2BAL442

SUBJECT- Economics of Development DATE OF EXMAINATION-07/08/2021

ANSWER 1-
Meaning of the term “Sustainable Development”

 Meeting the needs of present generation without compromising the needs

of the future generations

Objectives of “Sustainable Development”

maximising the net benefits of economic development,

subject to maintaining the stock of all environmental
1. and natural resource assets

bettering people's health and education opportunities

2.

Monitoring intergradational equity

3.

The concept for the first time was introduced by the Brundtland report “Our Common
Future” of the World Commission on environment and development in 1987.

However, we need to note the few important points regarding the concept of
“Sustainable Development” which are as follows:

 There may be certain apprehensions as to whether adopting such

environment- friendly policies would lead to a reduction in the pace of
development or not – the ANSWER IS “NO”. It is a process that is ever-
lasting and contributes significantly to the quality of life through
improvements in natural environments.

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 Not only does it lift the living standards it specifically helps in “bettering
people’s health and education opportunities and providing everybody an
equal chance to participate in the sphere of public domain, thus helping to
ensure a clean environment, promoting intergradational equity

 As it closely works towards increasing the real per capita income of the
common masses, it is thus closely related to economic development.

Thus, we can arrive at the following equation safely:

 SUSTAINABLE DEVELOPMENT= maximising the net benefits of economic

development, subject to maintaining the stock of all environmental and natural
resource assets (physical, human and natural) over time

Steps taken to ensure “Sustainable Development” [in the Indian Context]

In India, Various steps have been taken to ensure that development practices are undertaken
in confirmation with the principle of “Sustainable Development” and is an important player
in the bringing out environment- friendly regulations.

Key highlights of the same:

1. Constitutional Provisions- the Constitution of India reflects the need to protect and
conserve the environment and promote the sustainable use of resources and this is
also reflected in the international commitments of India. The Constitution under Part
IVA (Art 51A-Fundamental Duties) casts a duty on every citizen of India to protect
and improve the natural environment including forests, lakes, rivers and wildlife, and
to have compassion for living creatures. Further, the Constitution of India under Part
IV (Art 48A-Directive Principles of State Policies) enjoins the State to protect and
improve the environment.

2. Legislations by the government of India- Ministry of Environment and Forest was

being established in India in the year 1985, and today it is the apex administrative
body in the country for regulating and ensuring environmental protection and lays
down the legal and regulatory framework for the same. Since the 1970s, a number of

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SUBJECT- Economics of Development DATE OF EXMAINATION-07/08/2021

environment legislations have been put in place. Some of the important legislations
for environment protection are as follows:
 The National Green Tribunal Act, 2010
 The Air (Prevention and Control of Pollution) Act, 1981
 The Water (Prevention and Control of Pollution) Act, 1974
 The Environment Protection Act, 1986
 The Air (Prevention and Control of Pollution) Act, 1981
 The Hazardous Waste Management Regulations, etc.

3. Judgements passed by the Indian Supreme Court highlighting the need for
setting up special environment courts: Even though the Supreme Court of India has
adopted a selective approach in enforcing environmental law in the Indian Mainland,
the judgements passed by it have time and again proved quite significant in correcting
enforcement failures when they do not anticipate pushback from organized
constituencies. Some of the landmark judgements in this regard are the following:
a) M. C. Mehta v. Union of India, (1987) 4 SCC 463- By means of a Public
Interest Litigation (PIL), it was being pleaded before the Supreme Court to
restrict the tanneries from discharging effluents into the river Ganges. In
response to this, the Court, directed to implement Water (Prevention and
Control of Pollution) Act or Environment (Protection) Act, and also
directed for establishment of primary treatment plants etc. and those
industries that did not comply with the directions were ordered to be closed.

b) M.C. Mehta and Anr. Etc vs. Union of India and Ors. Etc 1986 SCR (1)
312- The concept of “Public Liability” was being discussed. This case is
also known as Oleum Leakage Case. It is a landmark judgment in which the
principle of Absolute Liability was laid down by the Supreme Court of
India. The Court held that the permission for carrying out any hazardous
industry very close to the human habitation could not be given and the
industry was relocated.

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SUBJECT- Economics of Development DATE OF EXMAINATION-07/08/2021

c) Rural Litigation and Entitlement Kendra, Dehradun vs. State of Uttar

Pradesh AIR 1987 SC 2187- Introduced the concept of “Sustainable
Development”. It was stated that the permanent assets of mankind are not to
be exhausted in one generation. The natural resources should be used with
requisite attention and care so that ecology and environment may not be
affected in any serious way.

Over the period of time, the principle of precautionary principal also developed and
mainly encompassed the following central concepts:

taking preventive actions in the

wake of uncertainity

shifting the burden of proof

onto the perpetrators of the
activity

increasing the level of public

participation and and exploring
a wide range of alternatives to
possibly harmful actions

4. Recommendations by the 186th Law Commission of India’s Report, 2003- made

recommendation for the establishment of environment- specific courts. This
recommendation was based on a review of the technical and scientific problems that

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came before the courts and the inadequacy of judicial knowledge on the scientific and
technical aspects of environmental issues.

5. Establishment of National Green Tribunal in 2010- it was set up under the

National Green Tribunal Act, 2010 with the following objectives:
 Effective and Expeditious disposal of cases related to environment
 Environment protection
 Conservation of forests and other natural resources
 Enforcement of Legal rights relating to environment
 Relief and compensation for damages to person and property

Conclusion- India has enacted a number of legislations to promote the concept of

“Sustainable Development” and this is also reflected in our constitution, however it needs to
noted that because of the huge population of India, there have been enormous demands
placed on the environment, with the regulations not proving to be entirely satisfactory in
dealing with the tremendous pressures. Therefore, India still needs to go a long way on
ensuring that the process of development takes place along with the preservation of the
environment.

ANSWER 2

YES, I quite agree with the statement – “The development story of present-day India was
scripted in the year 1991 and subsequently.” Therefore in lieu of the same, I would like to
begin by presenting a little backdrop to the statement above.

Backdrop:

 The Indian Economy till the year 1991 was a closed one. And the underlying principle
that was prevailing was that of “Import Substitution”. Foreign Investment and
technology were restricted and the government exercised control over finance and
capital markets. There were high duties and taxes with multiple rates and large

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dispersion. PSUs were considered as the engine of growth. There were restrictions

on Foreign Direct Investment (FDI) and Multinational corporations (MNCs).
 However, the factors that further aggravated the situation were that of:
1. Rise in Inflation- there was an expedient rise in the rate of inflation from
6.7% to 16.7% because of the rapid increase in the flow of money in the
economy which deteriorated the economy’s position.
2. Rise in the Fiscal Deficit- the economy experienced a rise in the fiscal deficit
because of the increase in the non- developmental expenditure. With the
consequence that there was a rise in public debt and interest.

3. Fall in Foreign Exchange Reserves- India’s foreign exchange reserve fell to

low ebb in 1990-91 and it was insufficient to pay for an import bill for 2
weeks. 

4. Iraq War- In 1990-91, war in Iraq broke, which led to a rise in petrol prices.
The flow of foreign currency from Gulf countries stopped and this further
aggravated the problem.

In view of such an economic crisis standing before the Indian Economy, the need for bringing
in economic reforms was being felt by the Indian Government, with the obvious consequence
being to plummet the immediate crisis the economy was facing and thereby steer it towards
“Globalization” along with a thrust on Market Orientation. These were “structural reforms”
and changed the very nature of the Indian Economy with the rolling out of the New
Economic Policy also known as the: LPG (Liberalization, Privatization and Globalization)
Policy.

Thus, Indian Response to the crisis was two- faceted:

 Introduction of the LPG Policy

 Proposing of Economic Reforms

The explanation of the two- faceted response of the Indian Government is as Follows:

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SUBJECT- Economics of Development DATE OF EXMAINATION-07/08/2021

1. The LPG Policy- the PV Narsimha Rao Government bought in this policy when
confronted with the grave economic crisis, with an aim to save the Indian Economy
from degrading any further and thus to kick- start the Indian Economy.

 Liberalization- removed the state’s control over economic activities and steered the
economy towards market orientation, as it assumed that it brings in efficiency in the
economy and the economic health would recover. This was done by abolishing the
existing License Raj in the country, reduction of interest rates and tariffs, curbing
monopoly of the public sector from various areas of our economy, approval of foreign
direct investment in various sectors etc;
 Privatization- it involved the transfer of control of businesses from public sector to
the private sector, not wholly but to a large extent it was being done. The public sector
enterprises had been experiencing challenges, since planning, such as low efficiency,
low profitability, growing losses, political interference, lack of autonomy, labour
issues, etc. Therefore, to address this situation government introduced privatisation in
the economy.
 Globalization- Globalization can be defined as the integration of the national
economy with the world economy. It enables a free flow of information, technology,
goods and services, capital investments and even people across different countries. It
brings the trade, investments and markets from various countries under one umbrella.
It promotes a more lucid economy.

2. Proposing of economic reforms- economic reforms were brought in various sectors

of the economy. The key sectors of analysis are the following:
a) Industrial Sector Reforms: it involved the abolition of the administrative
price mechanism (like price of crude was handed over to the market). The
reform process dismantled the system of industrial licensing which was
considered to be a main roadblock to the progress of India’s industrial
economy, measured in terms of industrial growth and diversification.
b) Financial Sector Reforms: the reforms enabled free flow of capital in our
country and simultaneously allowing companies to get the same from
investors. The problems that the banking system was facing were extensively
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analysed by the committee headed by Narasimhan. One of the major aims of

financial sector reforms is to reduce the role of RBI from regulator to
facilitator of financial sector.
c) Reforms in Trade and Investment Policy- Liberalisation of trade and
investment regime was initiated to increase international competitiveness of
industrial production and also foreign investments and technology into the
economy. The aim was also to promote the efficiency of the local industries
and the adoption of modern technologies.
d) External Sector Reforms- The first important reform in the external sector
was made in the foreign exchange market. In 1991, as an immediate measure
to resolve the balance of payments crisis, the rupee was devalued against
foreign currencies. This led to an increase in the inflow of foreign exchange. It
also set the tone to free the determination of rupee value in the foreign
exchange market from government control. Now, more often than not, markets
determine exchange rates based on the demand and supply of foreign
exchange.

Conclusion: Economic reforms were mainly intended to remove the bottlenecks which
acted as obstacles to industrial growth. These reforms and policies were a strategic shift to the
tune that these changed the very nature of the Indian Economy and thus forms the foundation
of the economy that we see today. These aimed at moving towards higher economic growth
and to have a sufficient reserve of foreign exchange in the country.

ANSWER 3

“POLLUTER PAY PRINCIPLE”

The above principal means that those who are responsible for bringing damage to the
human health and the environment should be made responsible for bearing the cost of
managing it. It can be explained with the help of a simple illustration- suppose a factory’s
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SUBJECT- Economics of Development DATE OF EXMAINATION-07/08/2021

by- product is a potentially poisonous substance and naturally enough it would be responsible
for its safe disposal.

This commonly accepted practice is a part of a set of broader principles under the 1992 Rio
Declaration to guide the process of sustainable development. This principle underpins
most of the regulation of pollution affecting land, water and air.

The “Polluter Pay Principle” has been incorporated in India and let’s take a look at the
concept’s evolution with the means of various judgements that paved the way for its
incorporation:

a) Vellore Citizens’ Forum vs. Union of India 1996(5) SCC 647- this principle
was incorporated as the absolute liability for damage caused to the environment
and extends not only to compensate the victims but also to the cost of restoring
the degradation caused to the environment in the process. The polluter ws held to
be liable for paying the cost to the individual sufferers along with restoring the
damaged the ecology.
b) The Oleum Gas Leak case (M.C. Mehta vs. Union of India)  AIR 1987 SC
1086- any enterprise that is engaged in a hazardous activity or an inherently
dangerous activity that poses a risk to those residing in the vicinity owes an
absolute and non- delegable duty to ensure that no harm is caused to any one in
their undertaking of the inherently dangerous activity. In case that happens, it
becomes absolutely liable for providing compensation to the sufferers. The larger
the harm cause, the more compensation it becomes liable to pay on account of
that activity undertaken.
c) M. C. Mehta vs Kamal Nath & Ors (1997)1 SCC 388- pollution being a civil
wrong is a tort committed against the society as a whole. Thus, any person who
commits the tort of creating pollution has to pay damages for the restoration of
the environment and the ecology. Under the Polluter Pays Principle, it is not the
role of Government to meet the costs involved in either prevention of such
damage, or in carrying out remedial action, because the effect of this would be to
shift the financial burden of the pollution incident to the taxpayer.

Conclusion: Although this principle has mitigated the damage that is being caused to the
environment in lieu of the inherently dangerous activities that businesses undertake, to some
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SUBJECT- Economics of Development DATE OF EXMAINATION-07/08/2021

extent, yet it remains adequate in the sense that there remains ambiguity with regards to the
clear identification of the actual polluter. Moreover, the compensation that is being provided
under this principle remains by inadequate with respect to the extent of damage caused to the
environment.

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