Air pollution an economic threat to India

Ashraf Engineer

November 18, 2023


Hello and welcome to All Indians Matter. I am Ashraf Engineer.

Recently, as the ban on firecrackers was violated in several places, three Indian cities found themselves on the list of the world’s 10 most polluted. According to Swiss group IQAir, the most polluted city in the world was Delhi with its air quality index – or AQI – at a staggering 430. Smog so thick you could cut it with a knife engulfed the city. An AQI level of 400 to 500 is bad even for healthy people and dangerous for those with existing ailments. An AQI of 150 to 200 brings discomfort to those suffering from asthma, lung and heart problems. Levels of 0 to 50 are safe. Kolkata was the second most polluted Indian city, taking the fourth spot globally. AQI: 196. Mumbai came in next, ranked 9 globally with an AQI of 156. The Bombay High Court had permitted the bursting of firecrackers only between 7 pm and 10 pm but that was neither followed nor enforced. The health implications of polluted air have been detailed often enough, so I won’t go there. There are very real economic reasons too for India to clean up its air. Let’s look at what they are.


Most people think of air pollution as an unavoidable by-product of economic growth. However, there is enough research to prove that air pollution depresses growth and income levels in a variety of ways, from lower worker output to fewer consumers visiting stores, lower RoI on assets and a rise in healthcare costs. Even tourism and agriculture are affected, and compliance costs rise for businesses.

If India is to achieve sustainable development, it must address this issue immediately.

Half of India’s GDP relies on sectors where work is done outdoors, such as construction and farming. This makes these sectors, and by extension the entire economy, vulnerable to poor air quality. When air is polluted, productivity drops. There are estimates that say air pollution costs Indian businesses $95 billion every year, that’s 2.5% of the GDP.

The World Bank has gone a step further by warning that by 2030 India could shed 4.5% of its GDP due to labour lost because of rising temperatures and humidity exacerbated by pollution.

The main source of pollutants in India are vehicle emissions, factory fumes, construction dust and farmers burning stubble.

Even sectors that operate indoors are not safe. Diminishing air quality impacts the efficiency of workers within enclosed environments too. This means more absenteeism, lower productivity and a drop in the quality of products and services. The World Economic Forum reports that, at current levels of pollution, employees must work overtime to compensate for their own lower output and that of absent colleagues. By solving the air pollution problem, India would reduce cases of burnout and it would lower attrition.

But that hasn’t happened yet and it’s why a growing number of investors include environmental considerations when deciding whether to invest in a country or not. Rising air pollution would justifiably make them question the long-term viability of companies operating in impacted areas.

There is a precedent in China for this. Many studies have linked China’s air quality to investment decisions. A study of more than 2,000 firms in 230 Chinese cities found that the higher the pollution levels, the lower the investments.

Incidentally, pollution impacts talent attraction too. Cities such as Delhi would not be as attractive and the talent that exists there might consider relocating. The cumulative effect of poor air quality on health and talent attraction could have a long-term economic impact.

Travel – for business and tourism – would be affected too. High pollution levels could cause a drop in international conferences and exhibitions, reducing revenue flows.

Tourism, which brings significant revenue to India, is already being affected. Attractions like the Taj Mahal are often enveloped in smog, keeping tourists away.

Even the cricket World Cup has been affected by the air quality. Many players have complained about the pollution and some teams have cancelled their training sessions in New Delhi. India, incidentally, is aiming to host the 2036 Olympic Games and that effort could be in jeopardy because of the concerns over pollution.

The problem with pollution is that many control measures involve the shutting down of economic activity. For example, construction has been banned for a while in some areas and this means that the really poor – daily wagers who work on the sites – have had their economic lifeline snapped.

India must invest in green infrastructure and monitoring mechanisms to prevent pollution. We need a good regulatory framework but also serious enforcement of existing laws and court orders.

Solving air pollution would boost the economy by raising consumer spending, for starters. When pollution levels rise, consumers stay indoors to preserve their health. Cleaning up the air would increase consumer footfalls in commercial areas, unlocking an estimated $22 billion in revenue. Sectors such as apparel and restaurants would benefit the most.

Importantly, safe air could lead to 1.7 million fewer premature deaths, according to data collated in 2019. The corresponding benefit to the economy would be $44 billion.

Pollution isn’t just a threat to your health, it has serious economic repercussions in the form of lower GDP growth, investor confidence and our global image. The ‘India story’ is a major talking point but are we talking enough about air pollution, perhaps the gravest threat to it?

Thank you all for listening. Please visit for more columns and audio podcasts. You can follow me on Twitter at @AshrafEngineer and @AllIndiansCount. Search for the All Indians Matter page on Facebook. On Instagram, the handle is @AllIndiansMatter. Email me at Catch you again soon.