Economics • Economic BasicsMedium
In analyzing Punjab's rural economy, what does a high reliance on groundwater extraction for irrigation signify regarding natural capital depreciation in state income accounting?
A. It represents an uncounted depletion of natural resources that overstates true sustainable economic growth✓ Correct Answer
B. It directly enhances the Green GDP calculations by increasing immediate crop yield values
C. It reflects a sustainable closed-loop hydrological cycle with zero environmental cost
D. It automatically reduces the Consumer Price Index by lowering agricultural input costs
💡 Solution & Explanation
Rapid depletion of the water table in central Punjab constitutes depreciation of natural capital, meaning standard Gross State Domestic Product figures overstate sustainable economic welfare by ignoring environmental degradation. Green GDP metrics explicitly penalize such ecological asset loss. Groundwater mining does not represent a closed hydrological cycle because recharge rates lag far behind extraction volumes. Pumping costs actually increase input expenses over time rather than lowering consumer price indices.
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