A policewoman wears a mask to protect herself from air pollution, in New Delhi, November 4, 2019. Photo: Reuters/Danish Siddiqui
Air pollution costs Indian business about $95 billion – or Rs 7 lakh crore – every fiscal year, a major report has found. This figure is around 3% of India’s total GDP. The cost is equal to 50% of all tax collected annually, or 150% of India’s healthcare budget.
The findings in the report, undertaken by Dalberg Advisors in partnership with Clean Air Fund and the Confederation of Indian Industry (CII), add urgency to tackling air pollution by stressing that this affliction imposes both heavy economic and heavy health costs.
India’s rapid growth ambitions are intertwined with the country being the seat of many deadly diseases, a gaping wealth inequality and widespread pollution of various realms of nature.
While the report’s findings seem to offer an insular look at a problem that affects more than just the economy, the dollar figures could spur action on the part of entities that have traditionally been slow to respond to concerns like wellbeing, like banks and lenders.
The 2019 World Air Quality Report said that India ranked fifth out of 98 countries for the average atmospheric PM2.5 concentration, behind Bangladesh, Pakistan, Mongolia and Afghanistan. Twenty-one of the world’s 30 cities with the worst air pollution are in India. New Delhi has the poorest air among cities worldwide.
According to the new report, while the cost of air pollution “may have gone unnoticed thus far, it is high and persistent.” The report’s authors identify six ways in which this cost manifests: lower labour productivity, lower consumer footfall, premature mortality, lower asset productivity, increased health expenses and welfare losses. Of these, “employee productivity, consumer footfall and premature mortality impact businesses directly.”
“While the government has taken aggressive measures to address the issue, the emphasis on air pollution across the globe has continued to be on its public health implications,” Gaurav Gupta, the Asia director of Dalberg, said. “It has now become important for Indian business to include air emissions in their profit and loss statements.”
Dalberg estimates that India’s workers take 1.3 billion days off work every year because of the adverse effects of air pollution on their health, amounting to $6 billion in lost revenue. Air pollution has also been shown to have significant effects on workers’ cognitive and physical performance, lowering their productivity and thus decreasing revenue by up to $24 billion.
Pollution’s effects on human cognitive imply higher impact on cognition-intensive sectors like investment banking and software development, the report says. The true scope and extent of causation is yet to be determined, although studies have shown that there could be a connection.
The report continues that around 98% of the cost of lost labor productivity is borne by people in India’s north and east — where air quality index (AQI) levels also frequently cross 300.
The authors also note that poorer air reduces consumers’ willingness to venture out, leading to lower footfall in stores and ultimately a revenue loss of $22 billion for consumer-facing businesses.
And when even local residents won’t step out, what of tourists? “Tourism saw a 1% decline in GDP, costing $2 billion,” the report states. “International tourists increasingly reconsider travel plans to India, with pollution being a top concern. This translated to 820,000 jobs lost in tourism and ancillary industries.”
Then there is the plethora of more physical consequences. For example, air pollution reduces visibility. As a result, 13% of flights in India in 2019 were delayed, affecting shipping and cargo handling.
The authors estimate that 1.7 million people died premature deaths due to air pollution in 2019 – nearly a fifth of all deaths in the country. Even more are expected to die this way by 2030. This would make India a major contributor to the global economic cost of premature mortality.
In economic terms, the lost working years cost the Indian economy $44 billion in 2019 – with the IT sector affected disproportionately so. This sector contributes 9% of India’s GDP and is a magnet for foreign investment, and it also loses $1.3 billion due to pollution-induced productivity losses every year.
The sector reported “a 10% decrease in attendance on bad air days, 3% reduced productivity and … 28% higher hiring challenges.”
The report zeroes in on Gurgaon, among some other areas, to make its point. Many startups in Gurgaon have moved out to other parts of the country citing air quality. Its IT companies are 6% less productive than their peers in South India. The satellite city’s promise of “medical tourism” has been a hard-sell thanks to the fact that more than 64,000 people were admitted at a single medical facility, for respiratory distress.
CII deputy director-general Seema Arora said, “While there is need for a lot of thinking, the business solutions to this business crisis … include ‘greening’ operations and supply chains, adopting renewable energy technologies, mitigating emissions through CSR activities and campaigning for more ambitious pollution policies.”
Seema Sharma is a Chandigarh-based independent journalist. She previously worked at The Tribune and The Times of India. She writes on forest, wildlife, environment, social and rural issues.