Previous Page Table of Contents Next Page

12 Economic value of biodiversity: a rural perspective for sustainable realization

P. Seema[20]


Quality of life in an economy is determined by management of different portfolios of assets-human, man-made, social and natural. Institutions determine how these portfolios are managed in an economy. As a stock of natural capital, biodiversity could be a source for increasing man-made capital as well as sustenance of communities. Substitution of natural assets by man-made assets in different stages of economic development happens at different rates. Also, in a developing economy, economic realization of such benefits encounters problems. Undervaluation and poorly defined property rights often contribute to inefficient management of natural capital. The realization of benefit flows from natural assets for subsistence is constrained by a host of other factors. Notable attempts at realizing the value in subsistence rural economies are reviewed to identify emerging issues in different contexts.


We generally find an asymmetry in the distribution of man-made and natural capital. The disparity in the distribution of man-made and natural capital is more distinct in developing economies than in the developed world. This could be because as man-made capital accumulates, some of it will be substituted and returned back by natural capital. As economies grow, the nature of relationship between man-made and natural capitals varies from complementarity to trade-off with different rates of substitution. This becomes evident when we compare cities in the north with those in the developing world or with their own historical stages in development. Many developing economies including India still have clear asymmetry in distribution of natural and man-made capital. While harnessing the benefits of man-made capital without depleting its stock has been a widely practised economic activity, the same may not hold true for natural capital. Though ecological sustainability has been discussed in different fora, practising the same is ridden with problems.

Biodiversity (at gene, species or ecosystem level) is a form of natural capital, ignoring the induced diversity in some instances of cultivated crops. How and to what extent this can result in economic benefit to rural subsistence communities forms the theme of this paper.


If development is about having the choice among ways to earn livelihood and income security, biodiversity can be instrumental in opening the options for the food and income security. But the poor are resourceless, i.e. they do not have rightful access (may have usufruct rights to common properties) to goods or marketable skills (remember traditional knowledge and skills do not enter the current markets and mostly end up as low-priced commodities). Hence the scope of market-based instruments in alleviation of poverty becomes limited.

A major option to provide the resourceless with food and income security is the social security system of a government. Most often these schemes end up providing temporary relief from hunger or unemployment. This is far from creating options for food and income security. Also the system is marred by corruption often eating into the basis of all options, i.e. biodiversity itself. In this context, the paper attempts to think on modalities to facilitate sustainable realization of biodiversity benefits minimizing the inefficiencies of market-based and social security schemes.

The way out could be linking markets to traditional knowledge and skills based on sustainable extraction of natural resources. Again, this would be affected by the functioning of the government machinery in assessing and checking permissible harvests or in the laxity to facilitate evolution of ex situ alternatives to natural sources of raw material or control overexploitation of resources like water.


Market-based mechanisms have been operational in realizing the benefits from man-made capital. These instruments may not work in similar perfection in the context of natural assets due to the absence of clearly specified property rights. Thus subsistence economies in the resource-poor situations find it difficult to realize the benefits from biodiversity, especially if realization involves a flow of benefits in money terms as also in kind for immediate consumption or use. Realizing the benefits in money terms involves conversion of natural forms of capital to man-made ones. Also we generally agree that the current stock of natural resources needs to be preserved if not augmented.

It has been recognized that the relationship between man-made and natural capitals moves from complementarity to trade-off between various stages of economic development (Pearce et al. 1990). While substitution of natural capital by man-made capital seems to be happening at a faster pace, there also are increasing instances of investing in the reverse substitution like the long-term research process of increasing varieties of cultivated species or by gradual cross-breeding in domestication. This addition to the natural diversity is only a minute proportion of the natural biodiversity stock of the world. There are also instances of substituting man-made capital in, say, corporate firms doing expensive outdoor landscaping in their office premises or owning a stretch of country club for their employees.

When it comes to the collectively owned and enjoyed assets without clear property rights, the substitution of natural capital by human/man-made capital happens at unsustainable rates. Due to undervaluation and lack of property rights, we may need to sacrifice more than one unit of natural capital for one unit of man-made capital.

Natural capital stock in subsistence economies already has kinked benefit functions at the current stock levels, evident from the less than stipulated forest cover as percentage of total land area in such countries. Hence it is important to consider the methods of realizing economic value of biodiversity which would not deplete the stock any further.

Also substitution of natural assets by man-made assets need not always have a positive impact on the value of remaining lesser quantum of natural assets, i.e. the marginal economic value of the natural environment may not always be positive. A riverside farm in the suburbs of a big city may fetch buyers like a corporate firm, but the owner of the farm (as well as his neighbours) compromises on his own natural capital in that his remaining farm, if any, would be less appealing and less valuable now. The remaining natural assets in the area are subjected to the negative externalities that the new land use inflicts on water extraction, increased traffic, pollution and congestion in the area. If the original land owner is not able to (or happy to) reinvest and build further man-made capital with the compensation he received for a part of his land, he may turn out to be a net loser. While substitution of man-made capital takes place, the compromises are less in magnitude, as the first substitution does not reduce the value of the remaining units of its capital stock.

When externalities are taken into account, conversion efficiency of unit natural capital to the profit generated in a corporate enterprise apparently would be poor compared to the efficiency of converting it for purposes of subsistence. This can be attributed to the nature and scale of externalities involved in both. Profit-seeking in biodiversity will have larger externalities than subsistence oriented biodiversity dependence. So studies on realization of value of biodiversity with respect to the subsistence communities seem to be more important from the perspective of rural poverty alleviation than in the context of sustainability. Nevertheless, the teeming population pressure causes concern about maintaining the stock and hence the realization of biodiversity value is being discussed in the context of sustainability and long-standing sustenance.


Rural subsistence economy is characterized by dependence on natural resources with no clear rights on them. Given the disadvantage in realizing economic benefit from the natural capital stock, the case of rural poor with no ownership rights over assets like land, water sources, biomass sources and technical skills will be even worse. They do not own much but are directly dependant on the collective natural capital. In the current scenario, in most of the developing economies, this dependency itself is being discouraged by state economic policies of privatization and nationalization. Take the case of a river ecosystem collectively dependent as anywhere else, but which recently got privatized by the Chattisgarh State Government in India. One of the poor states in the country, Chattisgarh has more than the stipulated area under forests while many other states with negligible forest area have thriving economies with high domestic product. Such poor states have been struggling to improve their economy and have been even requesting for economic compensation to keep the nations’ best forests intact even though most of their population are dependant on these. The Government of Chattisgarh leased out River Seonath to a private firm, depriving the access of surrounding communities and livestock to the river. In the absence of alternatives to bathe, fish and irrigate, communities started reacting and fearing political backlash, the lease is being reconsidered by the government, which may be legally and financially difficult given the contractual agreements and the heavy investments in huge check dams by the lessee. This illustrates the relative easiness to access the common natural assets by the resourceful rather than by the dependant communities.

There also are instances of denied access to the biodiversity by depleting the forest cover by mining, inflicting the damage of pollution and land degradation and providing some compensatory employment and health hazards. So depletion or delineation from the natural assets preventing their realization by subsistence communities has been conspicuous in development history.

Common grazing lands are shrinking fast and forests are becoming protected areas with reduced and controlled access for locals. When owned assets are very meager to transact or very fragile to produce well, rural marginal landholders face an uphill task. These people generally live in the periphery of dry forests with low input dry land agriculture and limited extraction from government forest area. The probability of conversion of land forest for expanding agriculture being almost non-existent and owned land being insufficient, these people are in a dire situation across the developing world. With increasing pressure on ground water-table from uncontrolled extraction by immigrant land users, and with scarce resources to dig deeper wells, rural marginal landholders are reduced to wage labourers - even that employment comes occasionally in the form of afforestation or soil conservation programmes. Most of these marginal farmers as mentioned earlier face declining yields due to what some refer to as “socially induced drought” (Mehta 2000) attributed to our dry land blindness in development planning. Indian villages in the dry zones are a typical example of such extreme situation. Their numbers are swelling due to large-scale rehabilitation of displaced population from hydroelectric projects.

While external agencies find it easier to access natural resources like water for soft drink factories or wilderness for potential ecotourism areas, with the advent of economic liberalization, the native population who had been both the guardians and dependants of biodiversity assets, find it more and more difficult to realize the benefit of natural assets even for sustenance. There are alternative sources for profit-making or entertainment in soft drinks and ecotourism, but for sources of sustenance there are no long-term substitutes (we have seen earlier in the paper, the substitutability of natural assets is less in general and for commonly owned assets it is even lesser).

The pressures of subsistence prevent complete delineation of local communities from common natural assets like forests resources, fishing in streams, etc. As the population increases, realization of value of biodiversity in these areas becomes a challenge in balancing the sustainability of biodiversity conservation, livelihood sustenance and economic growth.

Answers lie mostly in the issues themselves: access to forests, incentives for suitable biomass regenerating, conservative land uses in marginal lands, regulation of natural resource extraction in rural areas (water, minerals, timber and non-wood products) and strengthening of community institutions to harness the value of biodiversity sustainably.


Let us examine some success stories, which have proved that this balance is achievable and analyse what all the key issues and bottlenecks are in achieving this apparently ambitious but essential goal with the focus on tropical dry zones.


A number of factors can facilitate the realization of subsistence benefits from natural resources. For one, there should be control and regulation in the extraction of soil, water and bio-resources for commercial purposes. Where species have realizable benefits in plant parts, their harvesting from natural stands on a sustainable basis should be regulated by the government. However, if commercial harvesting involves destructive means (e.g. removal of roots, tubers, bark, stem, etc.), these threaten the survival of the species and should be avoided. Alternate means using afforestation and domestication by the communities should be explored.

Once the belief in sustainability is inculcated as an ethnic concept, it would not need many incentives to prevent exhaustive exploitation even if consumptive use is permitted. Other measures that can be incorporated in the development include certification of NWFPs which will guarantee sustainable harvesting practices. Such schemes can be strengthened with micro credit facilities and trade facilitation for under exploited species/products.

More can be done by improving the farming techniques, such as reintroduction of indigenous farming techniques incorporating components of nutrition and soil conservation. It would also help to make available the propagation materials of local varieties to ensure food security. Finally, human resources constraints and inadequate financing arrangements can hamper a community’s attempt to harness biodiversity value. Multilateral matching of goals between various stakeholders and agencies can help build social capital at the local governing bodies and community institutions. This is a constant and crucial component in realizing the benefits of biological diversity.


Koziell & McNeill. 2002. Poverty reduction through conservation and sustainable use of biodiversity. London, IIED.

Mehta, L. 2000. Drought diagnosis dryland blindness of planners. Economic and Political Weekly 35(27): 2439-2441.

Munasinghe, M. 1995, Tropical forests and sustainable development: a framework for analysis. In R.A. Kramer, N. Sharma and M. Munasinghe, eds. Valuing tropical forests: methodology and case study of Madagascar, pp. 11-18. Washington, DC, World Bank

Pearce, D.W., Barbier, E. & Markandya, A. 1990. Sustainable development economics and environment in the third world. London, Earthscan.

Purushothaman, S. 2003. Economics of land-use options in a tropical dry deciduous area. SANDEE Project Report.

[20] Ashoka Trust for Research in Ecology and the Environment (ATREE), Bangalore, India; E-mail:

Previous Page Top of Page Next Page