While India continues to experience a devastating wave of covid-19 infections, there is another silent pandemic brewing in the background.
Air pollution costs Indian business about $95 billion (around ₹7 lakh crore) every fiscal year. This is around 3% of India’s total GDP, according to a recently released research report. The cost is equal to 50% of all tax collected annually, or 150% of India’s healthcare budget.
The findings in the report, conducted by the global advisory firm Dalberg Advisors in partnership with the Clean Air Fund and the Confederation of Indian Industry (CII), show how air pollution not only has devastating health impacts, but imposes heavy economic costs as well.
The study found that India’s workers take 1.3 billion days off work every year because of the adverse effects of air pollution on their health. This amounts to $6 billion in lost revenue. Air pollution has also been shown to have significant effects on their cognitive and physical performance, lowering a worker’s on-the-job productivity and thereby decreasing business revenues by up to $24 billion, the findings explain. It’s worth recalling that in 2019, India had 1.7 million premature deaths from air pollution -- that is 18% of all deaths in the country, a figure that is projected to increase by 2030.
The report, Air pollution and its impact on business: The silent pandemic, based on a first of its kind study in the country, aimed to quantify the impact of air pollution on Indian businesses using three methods. First, using existing research on the effects of pollution on economies and companies globally and extrapolating it for the Indian context. Second, it leverages extensive data macro-analysis that correlates movements in air pollution. This was captured by Blue Sky Analytics’ BreeZo dataset, with top-level indicators that impact business: deterioration in health and reduction in the movement of individuals to avoid air pollution. Finally, it takes a bottom-up view of how individual sectors and cities experience air pollution, focusing on the IT and tourism sectors.
India’s IT sector, for instance, is heavily affected. The source of 9% of the country’s GDP and an attractive proposition for foreign investment, the IT sector loses $1.3 billion due to pollution-induced productivity loss per year. If air pollution continues to increase at currently projected rates, this figure could nearly double by 2030, the report adds.
The findings explain how the productivity costs of air pollution go beyond absenteeism. Employees overwork to compensate for lost productivity, which leads to burnout and attrition. Attracting the right talent, particularly in ‘white-collar’ industries such as IT and BFSI (banking, financial services and insurance), becomes a challenge in highly polluted cities. “This forces employers to either overpay for talent or to sacrifice on the quality of talent hired,” the study explains.
Air pollution has similar effects in the tourism industry in India. Reduced tourist footfall costs the sector $1.7 billion every year. Not only does air pollution create short-term shifts in tourist demand, but it also results in long-term reputational risks, the findings explain.
The report also reveals some eye-opening, city-specific figures. For instance, New Delhi has constantly been ranked as one of the most polluted cities in the world. The national capital’s well-documented air pollution problems cost it $5.6 billion (6% of its GDP) in 2019. Similarly, Kolkata, suffered an economic loss of $2.1 billion (~2.5% of the city’s GDP) due to air pollution -- higher than Mumbai and Bengaluru. Kolkata lost 6,000 people through air pollution linked diseases in 2019 at a mortality rate of 33%, higher than even Delhi, the findings reveal.