Challenges in Pollution-Prone India

• For a country like India, where vital economic centers such as Delhi NCR grapple with recurrent annual cycles of high pollution during every winter and Mumbai contends with a haze of pollution following the withdrawal of the southwest monsoon, this issue assumes alarming proportions.

Quantifying the Economic Impact

• The Reserve Bank of India’s Department of Economic and Policy Research (DEPR) has reported in its latest Currency & Finance 2022-23 publication that as of 2030, up to 5% of India’s GDP could be jeopardized due to lost labor hours resulting from climate change challenges, including extreme heat and humidity.

• If we factor in the impact of recurring annual pollution cycles in major manufacturing and service hubs, the drain on economic productivity becomes even more pronounced.

Micro to Macro: Uncovering the Wider Effects

• A World Bank paper published in June 2023, authored by A Patrick Behrer, Rishabh Choudhary, and Dhruv Sharma, provides compelling evidence of the well-documented micro-level repercussions of air pollution on health, productivity, labor supply, and other economically relevant outcomes.

• These micro-level effects aggregate into “macro-level effects that can be observed in year-to-year changes in GDP.” These findings, derived from data spanning approximately 550 districts across 25 states and Union Territories, consistent with the previously documented micro-level effects.

Regional Disparities and Economic Loss

• The impact of air pollution on India’s economy is further emphasized by a 2021 study in The Lancet Planetary Health, which examined the direct economic losses associated with air pollution in India, revealing substantial disparities among states in terms of economic losses as a proportion of state GDP.

• This discrepancy is particularly notable in states with lower per-capita GDP, such as Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh, and Chhattisgarh.

Economic Toll on Indian Businesses

A groundbreaking report from Dalberg Advisors, in collaboration with Clean Air Fund, Blue Sky Analytics, and the Confederation of Indian Industry, estimated that air pollution costs Indian businesses approximately $95 billion annually, equivalent to around 3% of India’s GDP.

Recent Data: Real-World Impact on Daily Life

Recent data further highlights the economic toll of air pollution:

• A 5% reduction in footfall was observed in Mumbai’s Linking Road shopping district during the highly polluted period between November and January.

• A rooftop solar company reported a 13% decline in the productivity of its solar panels on days with high pollution, diminishing the economic viability of solar energy in India.
• Employees at Bengaluru’s tech hub, Whitefield Corporate Zone, reported an 8-10% reduction in productivity at work.

Six Dimensions of Economic Costs

The costs of poor air quality manifest in six distinct ways:

1. Lower labor productivity
2. Reduced consumer engagement
3. Diminished asset efficiency
4. Increased health-related expenses
5. Welfare losses
6. Premature mortality

Methodology for Calculating Economic Impact

To calculate the impact of air pollution, the analysis relies on big data analytics, primary surveys, existing literature, and insights from various stakeholders, including air pollution experts, business leaders, and service providers.

India’s Air Pollution Challenge

• The challenge for India is evident, as over 20 of the world’s 30 cities with the worst air pollution are located within the country.
• Delhi stands out with the poorest air quality globally, with concentration levels nearly ten times the WHO target.
• A report in The Lancet ranked Delhi as the city with the highest per-capita economic loss due to pollution among major Indian cities.
• Emergency measures have been implemented, including a ban on trucks and all forms of construction in the National Capital Region.

Global Perspective: The Widespread Impact of Air Pollution

• Additionally, a report by Greenpeace Southeast Asia and the Centre for Research on Energy and Clean Air underscores the global impact of air pollution from fossil fuels, indicating that it results in three times as many deaths as road traffic accidents.

• This study estimates the economic cost of air pollution to be $2.9 trillion, roughly 3.3% of the world’s GDP.

Service Sector Vulnerability

• The service sector is not immune to the repercussions of air pollution. A study titled ‘The Effect of Pollution on Worker Productivity: Evidence from Call-Center Workers in China’ reveals that for every 10-unit increase in the air pollution index (API), worker productivity in call centers declined by 0.35%.

• Although call duration remained unaffected, workers spent more time on breaks.

Path Forward: Addressing the Air Pollution Crisis

In moving forward, it is imperative for India to address the issue of vehicular pollution through policy measures, reduce stubble burning while channelling it for more constructive use, promote clean fuel for sustainable economic growth, and incorporate principles of sustainable development into planning and urbanization.