India Must Price Environmental Damage to Stop Treating Nature's Costs as Free

India's economic model continues to treat environmental damage as cost-free, allowing polluters and developers to externalise harm to rivers, air quality and ecosystems without financial accountability, according to analysis by environmental economists and policy advocates. Establishing natural capital accounting and pollution liability frameworks is proposed as a necessary reform.

India's current development and regulatory model does not systematically require those who damage natural resources — polluting a river, filling a wetland, depleting groundwater — to bear the cost of that damage. This absence of environmental pricing means that economic activity that destroys ecological assets is effectively subsidised, as the costs are borne by downstream communities, future generations and taxpayers funding clean-up. Rivers are deteriorating, cities face worsening air quality and farmland is losing productivity, but these losses are not reflected in the accounts of the firms and individuals responsible.

Environmental economists argue that establishing a credible system of environmental liability and natural capital accounting would change the incentives that drive industrial and land-use decisions. Several frameworks for doing so exist internationally, including producer pays principles under pollution control laws, wetland compensation requirements tied to development approvals and environmental degradation levies on high-impact industries. India has some of these tools in law but enforces them inconsistently.

Advocates for natural capital accounting point to the growing international momentum behind ecosystem services valuation, including the Taskforce on Nature-related Financial Disclosures framework, which requires businesses to disclose their nature dependencies and impacts. For India, adopting mandatory environmental liability and natural capital reporting for large corporations and infrastructure projects could catalyse a shift in how development decisions are made and monitored. The reform would also strengthen India's credentials in international sustainability investment frameworks.

Key figure — Zero — the current effective price placed on most environmental damage under India's development model