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Ideas of India: The Development-Biodiversity Tradeoff in India

Shruti Rajagopalan talks with Raahil Madhok about infrastructure projects and how they affect the environment

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Shruti Rajagopalan

Ideas of India is a podcast in which Mercatus Senior Research Fellow Shruti Rajagopalan examines the academic ideas that can propel India forward. You can subscribe to the podcast on AppleSpotifyGoogleOvercastStitcher or the podcast app of your choice.

This episode is the second installment of a series in which Shruti speaks with doctoral candidates and postdoctoral scholars about their research as they enter the job market and the world of academia. In this episode, Shruti talks with Raahil Madhok about his job market paper, “The Development-Biodiversity Tradeoff in India’s Forests.” They discuss the effects of different types of infrastructure projects, state capacity, the Forest Rights Act, bird-watching and much more. Madhok is a Ph.D. candidate in the Food and Resource Economics Group at the Faculty of Land and Food systems at the University of British Columbia. His research focuses on environmental and development economics.

SHRUTI RAJAGOPALAN: Welcome to Ideas of India, where we examine the academic ideas that can propel India forward. My name is Shruti Rajagopalan, and I am a senior research fellow at the Mercatus Center at George Mason University. This is the 2022 job market series, where I speak with young scholars entering the academic job market about their latest research. I spoke with Raahil Madhok, Ph.D. candidate in the Food and Resource Economics Group at the Faculty of Land and Food Systems, University of British Columbia.

We discussed his job market paper, “The Development-Biodiversity Tradeoff in India’s Forests.” We talked about the impact of state-led infrastructure projects on biodiversity, the kinds of institutional constraints that reduce the adverse impact, Raahil’s work on structural transformation, urbanization and its impact on agriculture, and much more.

For a full transcript of this conversation, including helpful links of all the references mentioned, click the link in the show notes or visit Discourse Magazine DOT COM.

Hi, Raahil. Thank you so much for being here. This is a pleasure.

RAAHIL MADHOK: Thanks a lot for having me. I’m really looking forward to being on the podcast.

Effects of Infrastructure Projects on Biodiversity

RAJAGOPALAN: I really love your paper because it’s a very standard economist way of looking at things: Everything is a tradeoff. In this particular paper, you’re looking at what you set up as the development-biodiversity tradeoff, specifically in the Indian context, given a particular set of institutional constraints. What you find is really interesting. You find that very large state-driven projects that are building infrastructure, transportation infrastructure more specifically, or resettling people because some other infrastructure project was built somewhere else and the people had to be displaced and so on, actually have a pretty big impact on India’s biodiversity.

Can you just walk us through how this tradeoff plays out in India and especially how it plays out in different institutional settings because the variation of this tradeoff within India is also quite large?

MADHOK: That’s a great question. The reason I was interested in the first place is because biodiversity is a very critical natural resource. It provides a lot of ecosystem services that we need, like food and water, clean air. It has cultural value, et cetera. You can see in any headline that humans are responsible for, or human economic expansion is responsible for, a lot of biodiversity loss.

My goal in this paper was mostly to quantify the magnitudes and the mechanisms through which economic activity is driving that biodiversity loss. I chose India because it’s a country that is very biodiverse. I think 12% of all the world’s species exist in India. India is also on a development campaign whereby they’re approving lots of infrastructures constantly.

One unique aspect of the infrastructure that India is building is that a lot of it involves encroachment into the forest. Projects are sited in these eco-sensitive zones, if you want to call them that. What I did was basically quantify biodiversity through a new measure from an app called eBird using this indicator species, which are the birds. I got a million bird-watching diaries from the users as they travel around the country, and I combined that with permits for the infrastructure projects, for all of them that were approved between 2015 and 2020.

What I find is basically that there is a big tradeoff. The development is triggering a lot of biodiversity on the order of about 20%, meaning that the development projects are contributing about 20% of the national species loss over that period. As you mentioned, there is a lot of heterogeneity in the sense that places where the institutions are more extractive in nature—meaning that it’s just build, build, build—that’s where the tradeoff is the biggest.

Then there’s also places in India that are a bit more inclusive, in the sense that the individuals or the communities that live near the development projects, specifically tribal groups, are involved in the development planning a bit more. And so their needs are expressed more through the development process, and the projects are more sustainable in those locations. The takeaway is that these grassroots institutions are important for achieving sustainable development in India.

Best and Worst Kinds of Development Projects

RAJAGOPALAN: Two threads that I want to pick up from this: One, there’s a lot of heterogeneity. Can you walk us through what kinds of development projects are the worst in terms of biodiversity loss and which ones are not so bad? As economists, if we’re thinking about cost-benefit analysis, we really need to know what is on the benefit side of the ledger when it comes to loss of biodiversity.

MADHOK: No, that’s a great question. Fortunately, in all of the construction permits I’ve collected, they categorized the projects into six categories. There’s transportation projects; there’s resettlements, which are camps that they build for relocating people; there’s electricity; irrigation; and mining projects. The most harmful projects that I found were the resettlement camps and the transportation projects. The least harmful ones were the irrigation and the mining projects. I know the mining one is a bit surprising, so I can talk about that in a bit.

I think the reason that the resettlement camps are the most harmful—it’s a bit hard to say because I don’t have too many details about the characteristics of the specific projects—but these resettlement projects are a whole package of infrastructure. They’re building new communities, basically. There’s pipelines there, there’s transmission infrastructure—it’s more than just one single project. Transportation, of course, because it’s been shown in the literature—roads that cut forest, fragmented forest, cut off migration corridors and things like that. That can be one of the reasons.

Then irrigation, it didn’t have a huge effect. I think it is because there’s two things happening with irrigation. One, the physical project itself and the deforestation caused by it, especially by dams in remote places—that’s triggering species loss because there’s habitat loss, but it’s also opening up water habitat. That can attract new species, and so there’s this offsetting effect.

Then mining, I think, was mostly a data aberration. The reason is because, like I said, my biodiversity data is coming from these individuals who are going around collecting species information. There’s not a lot of them who are going to remote mining districts. I found that the use of this app is less than half of the average in most of the mining districts. Actually, when I did a verification and I restricted the sample to the high-activity districts, the mining effect doubles in magnitude, which seems a bit more of a reasonable result.

A False Dichotomy?

RAJAGOPALAN: One of the bigger questions I have about the broad tradeoff, now that you’ve highlighted the details of different projects, you set it up as an economic development tradeoff against biodiversity. But to me, it seems like that’s not a foregone conclusion, for two reasons. One, there can be economic development through other mechanisms. For instance, India’s largest economic growth was unleashed by dismantling a particular regulatory system.

The other is also, even assuming that India does need all these infrastructure projects for further growth—it does need to build this capacity—it seems like the tradeoff is more about badly designed, large-scale, state-led projects than actual economic development. I guess this is a long-winded way of asking, do we know if any of these projects actually lead to development?

MADHOK: No, that is a good question, and you’ve caught me on a kind of definitional issue. You’re right in that this paper it’s about infrastructure development and biodiversity loss, whereby infrastructure development is a consequence or a symptom of broader development because infrastructure fuels development or it’s part of the process of development. I’m just calling it the development-biodiversity tradeoff. I could call it the infrastructure development-biodiversity tradeoff.

You’re right in that economic development comes through different ways. And actually in the paper, I control for general economic trends so that I’m only isolating the infrastructure effect. Because I want to be clear that what I’m looking at here is more of a specific mechanism of development, which is just infrastructure building, which is something important that’s fueling India’s development. But of course, you’re right, there’s many other factors.

RAJAGOPALAN: I picked up on it because it’s important for the policy implications of your paper. I know what you’re saying about the definitional issue, and I have no quibble with that. It’s pretty commonsensical that you do need to build infrastructure, especially at the level of India’s current growth and where it wishes to go in its growth trajectory.

The reason I think it has policy implications is one way of reading the TL;DR version of your paper is, “Oh my God, we need to stop this kind of crazy economic development.” There is a group of people who think the only way to get toward sustainability is degrowth, right?

MADHOK: Yes.

Protecting Biodiversity Alongside Continued Development

RAJAGOPALAN: That’s one reason. The other reason is, it’s very rare for an economist to say this, but is it actually possible to have our cake and eat it too? Is there a way of making sure that biodiversity doesn’t get harmed by bringing in certain other institutional mechanisms?

This is where I think the second part of your paper becomes so important, where you’re talking about how this is not simply a foregone conclusion. This really depends on the kind of project, the location of the project, how quickly these permits were pushed through, how much say the local participants have, what kind of embedded nature of bureaucrats you have in that particular system and so on.

MADHOK: That’s a great point. That’s something I like about the paper, in the end, is that it’s not a dismal conclusion as a lot of economics papers are. What I highlight is that there are certain institutions that can be developed or emphasized that can mitigate the bad effects of these development projects. It’s not a foregone conclusion. There’s a lot of room for improvement. The first thing is, like I said in the beginning, these projects are specifically ones that involve forest encroachment.

India has a Forest [Conservation] Act, which says that “Forests should not be given to any public or private entities for nonforest activities.” All the permits I use are for nonforest activities. There needs to be a really good reason for building projects that encroach into forests. I think that having more stringent criteria or regulatory procedures for the environmental, ecological review process is one way to prevent these biodiversity effects.

Then, again, going back to the institutional things, the type of governance is important. If we agree with my results, I’m showing that places where the Forest Act or the development of this infrastructure interacts with other types of institutions that emphasize community forest governance can achieve more sustainability. That’s because those who live there and are disadvantaged by the projects know a lot about biodiversity; they’re custodians of biodiversity. And emphasizing their rights to the forest and allowing them to participate in the development planning process and having an avenue to voice their needs is important.

That’s something that I looked at, and I found that when those types of institutions are more grassroots, that the biodiversity impact and the negative biodiversity impact is less than half of what it is in places where their needs are not emphasized. I think definitely having an institutional framework where there’s multiple, multifaceted institutions, both partially centralized but also decentralized, speaking to each other, is the saving grace for protecting biodiversity in India.

RAJAGOPALAN: Actually, the tradeoff that you mentioned is even smaller once we start looking at these mechanisms where the people who have a stake in biodiversity actually have a voice in the matter. One of your results is that it’s 70% smaller in these inclusive districts, which is an extraordinary result.

It also goes to show why the resettlement projects are so bad, which is there are these groups of people who are coming in from somewhere else. They should have ideally moved to a city. They’re most likely land-owning groups who had some kind of eminent domain or takings for some other infrastructure project. They’re just placed in this new environment, and now they need to scramble for their livelihoods. They go around cutting trees and overtapping all the water, common-pool resources and so on, right?

MADHOK: Right.

RAJAGOPALAN: There is something quite lovely about what you’re seeing in that this is not just a matter of who gets the permit. It’s so much more about who has either the individual or community property right.

MADHOK: Just to take a step back, the reason that understanding the institutional underpinnings is important in India is because there are 200 million scheduled tribes or indigenous group members that are living in the forests. One way that development can be done is by excluding them, and just like you said, just taking control of that forest and building there—or including them in the process.

The hard part here is to first measure inclusion, and then the second is to verify the actual mechanism by which they are participating in the process. What I did was, I used a simplified categorization from a different paper by Banerjee and Iyer, where they categorize districts as individualistic or extractive—yes, so the ryotwari or the zamindari districts. I consider the ryotwari districts inclusive because they show in that paper that in those districts, there’s more potential for collective action, and there’s more involvement of the disenfranchised in the development process. My results are really the difference between those two districts.

Now, a lot of people have talked about that paper and been unclear about the mechanism and say, “Is it really more inclusive in these ryotwari districts?” What I’m able to do in my paper is show a mechanism that has a bit more teeth, which is the invoking of the Forest Rights Act, which is an act in India that gives land rights to the tribal groups. In the project permits, they have to indicate whether they implemented that act, whether they followed the procedures and specifically whether they obtained informed consent. I have a direct measure of whether there was actual interaction between the project authorities and the village council that manages that forest.

That’s the mechanism that I lean on there to say that in these locations, which are the ryotwari districts, they’re also places where informed consent is more likely to take place. That seems to be the plausible mechanism by which development is more sustainable there, because the disaffected indigenous groups can mobilize around their needs and express it and take more control over their forests.

Effects of State Capacity

RAJAGOPALAN: This is a really famous paper. The big takeaway from the Banerjee-Iyer paper is that history casts a very long shadow, that colonial institutions that were set up more than 200 years ago, they still have this huge impact on contemporary governance issues. I was curious if you’ve had a chance to look at Alexander Lee’s paper, which is also looking at the same variation between zamindari and ryotwari that Banerjee and Iyer look at.

What he finds, I find a little bit more compelling, in the sense that he’s talking about how this variation is explained by building state capacity. Because in ryotwari areas where there is no middleman, the colonial government was forced to set up some kind of local tax collection office, which also then started building other capacities: some basic land registration, issuing birth certificates or setting up a small school and so on, so forth.

Getting a head start in building state capacity is actually what explains the variation today. Going by the description that you gave of whether rules were actually followed—when it came to the Forest Act, in particular, tribal rights—and were all the procedures followed? Was this process applied not just in letter, but in spirit? To me, it seems like the state capacity explanation suddenly has a lot of import for what you’re talking about.

MADHOK: Yes, absolutely. That’s a fantastic paper by Lee. I think that it’s actually a really good interaction with my paper and that he’s showing that the persistence effect is through contemporary state capacity. That’s what was being argued in the original Banerjee paper, but it was a bit more difficult there to prove that mechanism, which is what Lee did.

You could also look at that Lee paper and say, “Well, state capacity is a mechanism by which the Banerjee effect is happening.” But state capacity itself is still a broad umbrella mechanism because we still want to know what are the actual means by which state capacity is being delivered and achieving development outcomes.

I think that that’s one way that my paper becomes relevant here, is because I’m able to show a specific mechanism, going first from the Banerjee paper; then through the Lee paper, which shows it’s state capacity; and then through my paper, which says that the state capacity is coming through the implementation of these acts which have a bit more of a bite, like requiring the conformed informed consent by law. That’s being followed more in the ryotwari districts.

RAJAGOPALAN: I think you’re underselling your paper a bit because what you’ve uncovered is a second tradeoff. There is this tradeoff between biodiversity and strong state capacity in the sense that if it’s a very strong state, then they’re going to take on these huge projects, they’re going to implement them and there’s going to be greater biodiversity loss.

What you actually show through your mechanism, especially going through the longer arc of colonial institutions to contemporary governance and following these procedures, is that actually higher state capacity need not necessarily lead to greater loss in diversity. In fact, the way it plays out is if you have higher state capacity, they are more likely to follow the rules correctly and have fewer badly designed projects. Is that a good way to think about your result?

MADHOK: Yes, absolutely. I think that it’s a good way to characterize the way that it’s playing out currently in India because the Forest Rights Act is technically a requirement for any project. Like I was saying before, the Forest Act says that the projects, if they get approval, then they can go build anywhere. But then, with the Forest Rights Act, it says that these groups, these indigenous groups, have to be consulted. Now there’s these two intersecting institutions.

But many would argue that usually the consent requirement is often flouted by many firms. This is showing up in the news all the time, but there’s some examples of it working. For example, the most common example was the Vedanta mining case. In 2010, the Vedanta mining company tried to build a bauxite mine in Odisha, but then there was an uprising by the local scheduled tribes. And it went to the supreme court, and they [the gram sabhas] rejected the project permit and it couldn’t get built. That’s a celebrated case.

My paper shows that whereas that’s far and few between now, it could become more common if the institutions were strengthened a little bit more. And if we use the arguments from the three papers that we discussed, then state capacity has a really big role to play for making those types of situations more common.

Managing Communal Assets

RAJAGOPALAN: This is not directly in your paper, but based on what you just talked about in terms of the Forest [Conservation] Act and the Forest Rights Act. And what is hidden in there is a list of supreme court cases, all the Godavarman, each of those court orders, which was continuing mandamus petitions essentially.

This process started in the mid-19th century when the British overnight nationalized forests and disenfranchised the original custodians. There was a lot of loss of biodiversity. It isn’t well documented because they were just cutting trees to build the great Indian railway project for colonial extraction at a faster pace and so on. India, for whatever reason, with its 1950 constitution followed the same path. These rights were never handed back to the tribal communities. It’s a very recent development that this has happened.

Do you think going forward, this is not just a question of a development project or biodiversity tradeoff? There is a larger question of community property rights and who is supposed to manage these great national assets because unlike other replenishing environmental questions, biodiversity once lost is lost. These species basically go extinct. It’s not like, “Oh, there was a little bit of deforestation. If we work on it for 20, 30 years, we can grow the trees back,” which is what they’ve done in many other places.

MADHOK: Yes, absolutely. As you mentioned, India inherited the Forest Act from the British, and that act was written basically for maximum timber extraction for the British to take things back home. There were not very many changes in the act even after independence. It was only in 1980 that they really made big reforms and started writing in clauses to protect the forest. At the end of the day, the forests were still being governed and the decisions were still being made from the top. It still is that way. It’s a centralized institution, the forest department.

As I mentioned, what is happening and what should be emphasized more, and that’s what the second part of my paper is about, is that the institution of the forest department should not be so centralized. It should devolve more authority and decision-making and planning to community forest governance, which only started happening in 2006 when the Forest Rights Act was developed. I would argue there’s still a lot more work to be done.

For example, even for the Forest Rights Act to function, a scheduled tribe has to go through so much paperwork, first to even prove that they are a scheduled tribe. Then they have to go and apply to get recognition of their claim over the forest, which goes through lots of bureaucracy. More than half of those claims are usually either still pending, often rejected, denied. And then there’s more room for these firms, with the backing of the forest department, to just go in and build. I think, yes, shifting away from that colonial governance and going toward community governance—which is in the works, the blueprints are there—but if it can be done a bit more appropriately, there’s definitely a lot more room for protecting biodiversity.

That’s exactly what my result is showing in the places where it is implemented—because there are places where it is implemented and when it does happen and the firms report when they go through the Forest Rights Act process. If I just isolate those ones, their impact on the environment is much less. That’s a positive thing that comes out of all of this.

RAJAGOPALAN: Yes, I think it’s a fantastic paper. India is exactly at that point in its growth trajectory where these big questions are getting mediated right now. This shows exactly where the tradeoffs lie and what are the margins on which there can be massive improvements without this huge loss of biodiversity.

Farm Outmigration and Food Supply

RAJAGOPALAN: What are some of the other projects that you’re working on?

MADHOK: Among the other ones, probably the one I’m most excited about is also looking at a different dimension of development and land use change. But we’re asking a very big high-level question, which is, “How can we feed the population when all of this labor in India is moving away from the farms and toward the city?” If everyone’s moving away from the farms, then where’s the food going to come from? This is a joint paper with my colleagues at UBC, Frederik Noack; there’s Mushfiq Mobarak at Yale and Olivier Deschenes at UC Santa Barbara.

The common belief is when farm labor moves to the city, the farmers just replace it with machines. That’s what we saw in the U.S. and many other developed countries; they just mechanized agriculture. We started to study the same thing in India, and we find the total opposite result, which is kind of surprising, which is that when labor activity moves away from the farms, the farmers actually contract their output and they disinvest from technology and they just started shifting out of agriculture altogether. We found that surprising.

We did a little bit of theory and expanded our results to look at spillovers. We thought, “Well, if some farmers are contracting output, it could increase the prices of food and then incentivize other farmers elsewhere to increase the production. Is there really going to be a food scarcity problem?” We were able to show that there’s a compensating geographical shift in where food gets produced through what economists would call general equilibrium effects. We were able to characterize that and just show how much of the food shortage is made up for by domestic economic forces and characterize the geography or agriculture in India going forward.

RAJAGOPALAN: Is one of the reasons that migrants are not substituting the labor of migrants and using capital instead—is it that land holding sizes in India are so small? I believe the average land holding size is 1.1 hectares. It’s pretty small. It’s not easy to mechanize agriculture the same way Americans did more than 100 years ago. Is that what is going on here?

MADHOK: Yes, absolutely. Yes, farm size is definitely a big thing. There’s a lot of constraints on modernizing agriculture in India, largely because of the family farm model. The other thing is something you also touched on, which is that technology on Indian farms is often labor-complementary. They’re not using fancy machines because of these kinds of constraints we talked about, but they’re using work animals and they’re using a lot of manual labor.

If labor leaves agriculture and that labor is needed to apply technology, then there’s less room to substitute because the technology itself requires labor. Then the most efficient thing to do is to just reduce your use of technology. We find that a big reason is because of the type of technology, which is labor-complementary and not labor-saving.

RAJAGOPALAN: No, that sounds about right. I think what I find interesting about more generally your research is, you are going through the big questions of structural transformation. How is India moving out of agriculture, potentially into industry but also services and other areas? How is India going to enable the structural transformation through these large projects? What is at stake and what are we giving up in order to get the structural transformation? It’s really a fascinating area of research.

Bird-Watching and Other Pandemic Activities

RAJAGOPALAN: The thing I found fascinating about the paper is, first, I assumed that you got into this because you like bird-watching. Is that how you entered this area, and then the bird-watching app and so on? Is this something you engage in yourself, and how did this play out during COVID? But I’m just more curious generally about have you been bird-watching through the pandemic and calling it research?

MADHOK: Part of the reason I did get into it—it’s not specifically bird-watching, but I’m just a really big nature guy. The reason that I’ve always been fascinated with the environment and environmental economics is mostly through being a kid and going to India to visit relatives, spending a lot of time in Sikkim and in Ladakh, and just being in the natural world. I hike constantly because I live in British Columbia, and in Canada we have access to—

RAJAGOPALAN: Yes, so Banff is right there.

MADHOK: Yes. I’m constantly outside in the natural world, and I just really enjoy it. Bird-watching is actually kind of new. I only got into it because my supervisor was the one who encouraged me to think about how to measure biodiversity, and then this came to me. So as a consequence, I started being interested in birds.

During COVID, I actually wrote a separate paper about how the COVID lockdowns in India changed the biodiversity of cities. I used the fact that a lot of people started downloading the same app I was using in my job market paper. It’s called eBird. During COVID, when everyone was bored, they were downloading this app and bird-watching from their balconies. I thought like, “Oh, I could just use their data to see how biodiversity changed before and after the lockdown.” Well, that’s one boring thing I did during lockdown, is more research. But other than that, I was running a lot, currently training for a half-marathon.

RAJAGOPALAN: You sound very productive.

MADHOK: All kinds of stuff, yes.

RAJAGOPALAN: Please tell me that you do silly things like binge-watching bad shows. Is that part of the portfolio, or are you just researching, running, getting healthy, protecting the environment?

MADHOK: No, no. I’ve been binge-watching “Indian Matchmaking.”

RAJAGOPALAN: Oh, boy.

MADHOK: That’s been my guilty pleasure the last few weeks, if I have to be totally honest.

RAJAGOPALAN: No, it has been my guilty pleasure too, and my favorite character in that show is the pandit [Janardhan Dhruve] who’s the face reader.

MADHOK: Oh yes, he’s great.

RAJAGOPALAN: This dude just comes out of the blue, and he’s so confident about everything he’s saying.

MADHOK: I know.

RAJAGOPALAN: He’s got to be my favorite insane, weird character in any reality show of all time.

MADHOK: Absolutely. I hope in the future they make some type of cult documentary about him.

RAJAGOPALAN: Raahil, this was such a pleasure. Thank you for taking time to do this. I’m really excited and look forward to everything else that you’re writing.

MADHOK: Thanks a lot for the opportunity.

Shruti Rajagopalan

Shruti Rajagopalan is Senior Research Fellow at the Mercatus Center and a Fellow at the Classical Liberal Institute at New York University School of Law.

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