At the World Economic Forum in Davos, Gita Gopinath, Deputy Managing Director of the International Monetary Fund, made a striking point, saying pollution
is a bigger problem for India than tariffs.
In India, pollution is often framed as a public health issue. But it is also one of the largest and most persistent economic drains on the country today.
Dirty air does not merely cause coughing or breathing difficulties. It steadily erodes household incomes, weakens business performance, and slows overall economic growth.
According to the Lancet and the Global Burden of Disease study, air pollution caused about 1.7 million deaths in India in a single year. A large proportion of these deaths occurred among working-age adults. When people die prematurely or suffer repeated illness, the economy loses income, productivity, and skills that cannot easily be replaced.
Economic cost is immense
The same Lancet analysis estimates that air pollution costs India roughly 9% of its GDP each year after accounting for healthcare expenses, lost productivity, and welfare losses. This impact exceeds what India spends annually on healthcare and education combined.
The World Bank has reached similar conclusions. Its assessments show that environmental degradation, driven largely by air pollution, has cost India between 5 and 6% of GDP over multiple years. This is not a one-time shock but a recurring annual loss embedded in the economy.
Businesses are already feeling the effects. Retail chain Shoppers Stop recently said its third-quarter sales were hit by lower footfalls, which it linked to elevated pollution levels in parts of North India. When air quality deteriorates, consumers step out less, and discretionary spending suffers.
Research supports this trend. A 2021 study by Dalberg estimated that air pollution costs Indian businesses around $95 billion annually. Workers fall sick more frequently, productivity declines, and efficiency drops. This is capital that could otherwise be directed towards higher wages, expansion, or new investment.
In 2019 alone, air pollution reduced consumer spending by an estimated $22 billion and wiped out 1.3 billion working days, according to a report released in 2022. Since then, pollution levels in many cities have worsened further.
The report illustrates the impact clearly. Footfall in Mumbai’s Linking Road shopping district falls by about 5% during the heavily polluted months between November and January.
A rooftop solar company reported a 13% drop in panel productivity on high-pollution days, undermining the economics of solar installations. In Bengaluru’s Whitefield corporate zone, a major technology hub, employee productivity declined by 8 to 10% during periods of severe pollution.
Healthcare costs add another layer to the burden. Studies in medical and economic journals show that pollution-related illnesses such as asthma, heart disease, and stroke significantly increase household medical expenses and public health spending. Families pay more out of pocket, while governments divert resources from development to treatment.
The simplest way to view this is as a hidden tax on every Indian. People pay it through hospital bills, lost workdays, and slower income growth. Unlike many other economic challenges, this cost compounds over time. Dirty air today produces a weaker and less productive workforce tomorrow.
The conclusion is difficult to ignore. Clean air is not anti-growth. It is pro-productivity.
If India aims to build a stronger and more resilient economy, pollution control must be treated as economic policy, not merely environmental policy. That requires stricter enforcement of emission norms, meaningful penalties for violators, cleaner transport and industrial standards, and stronger coordination across states. The laws already exist. What is lacking is consistent and firm enforcement.
Cleaner air is neither a luxury nor a slogan. It is an economic necessity. If India is serious about faster growth, higher productivity, and better living standards, reducing pollution is not optional. It is one of the smartest economic decisions the country can make.
