IMPACT OF AIR POLLUTION ON ECONOMIC GROWTH
1. Context
Given that GDP growth rates and per capita income levels are generally seen as having a direct trade-off with emissions levels, conventional wisdom tends to dismiss air pollution as an unavoidable by-product of economic growth. And this tends to limit the urgency for formulating a policy response to the problem.
2. Impact on Economic Output
- According to the most recent report on Currency & Finance 2022-23 by the Reserve Bank of India's Department of Economic and Policy Research (DEPR), it is projected that climate change issues, such as extreme heat and humidity, could put up to 4.5% of India's GDP at risk by 2030 due to the loss of labor hours.
- If we consider the additional impact of recurring annual pollution cycles in key manufacturing and service centers, the strain on economic productivity becomes even more significant.
- These findings are based on data gathered from approximately 550 districts across about 25 states and Union Territories, which collectively contribute to 90% of India's real GDP. They align with well-documented micro-level effects of heat that generate broader aggregate-level consequences.
- A study from 2021 published in The Lancet Planetary Health, which examined the direct effects of air pollution on mortality and morbidity in India, identified substantial variations in economic losses as a percentage of state GDP, ranging from 0.67% to 2.15%. The states with the most significant losses were those with lower per-capita GDP, including Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh, and Chhattisgarh.
- This is particularly relevant given that RBI data indicates that approximately 50% of India's GDP is generated by sectors exposed to heat, which is a rough estimate of the portion of GDP linked to outdoor work. In comparison, European Central Bank figures show that less than 25% of European GDP is associated with the same sectors.
- The 2021 study mentioned earlier gathered anecdotal evidence from various parts of India, including a 5% drop in footfall in Mumbai's Linking Road shopping district during highly polluted periods between November and January, a 13% decrease in the productivity of rooftop solar panels on days with high pollution, and an 8-10% reduction in workplace productivity reported by employees in Bengaluru's tech hub, Whitefield Corporate Zone.
- The study identified six distinct ways in which poor air quality incurs costs, including reduced labor productivity, decreased consumer activity, lower asset productivity, increased healthcare expenses, welfare losses, and premature mortality. To assess the impact of air pollution, the analysis employed big data analytics, conducted primary surveys, reviewed existing literature, and incorporated insights from various stakeholders, including academic experts in air pollution, as well as business leaders and service providers across different sectors.
3. Challenges for India
- Addressing air pollution is a pressing issue in India, given that more than 20 of the world's 30 most polluted cities are located within the country.
- Delhi, in particular, holds the unfortunate distinction of having the worst air quality among cities globally, with PM2.5 concentration levels nearly ten times higher than the World Health Organization's recommended standards.
- A study published in The Lancet identified Delhi as the city with the highest per-capita economic losses attributable to pollution among major Indian cities.
- As air quality deteriorates to the "severe plus" category, emergency measures are slated to be implemented in the National Capital Region, including the prohibition of trucks and various construction activities.
- A report jointly produced by Greenpeace Southeast Asia and the Centre for Research on Energy and Clean Air reveals that the costs associated with air pollution from sources like fossil fuels, gas, coal, and oil result in three times as many fatalities as road traffic accidents worldwide. According to this study, the economic toll of air pollution stands at $2.9 trillion, equivalent to approximately 3.3% of the global GDP.
- As highlighted in the RBI report, this trend is especially concerning in developing countries such as India, where a significant portion of employment opportunities is still tied to outdoor economic activities. Sectors like agriculture and construction constitute major sources of employment, while urban areas heavily rely on delivery services and security agencies for job creation.
4. Impact on the Service Sector
Air pollution can have several significant impacts on the service sector, which encompasses a wide range of industries such as healthcare, education, hospitality, transportation, finance, and more
Key effects on the Service Sector :
- Poor air quality can lead to an increase in health-related issues, including respiratory problems and cardiovascular diseases. This can result in a higher demand for healthcare services, leading to increased costs for both the healthcare sector and individuals. Hospitals and healthcare facilities may experience a surge in patients, putting pressure on their resources.
- Air pollution can have a direct impact on the productivity of service sector employees. Employees exposed to polluted air may experience health issues, reduced cognitive abilities, and absenteeism, which can lead to decreased work efficiency and increased operational costs for service-based businesses
- In areas with poor air quality, the tourism and hospitality industry can suffer. Tourists may be discouraged from visiting, impacting hotels, restaurants, and recreational activities. This can result in reduced revenue and job losses in this sector.
- Air pollution can affect transportation and logistics services in multiple ways. Poor air quality can disrupt transportation networks, leading to delays and increased costs in the shipping and supply chain. It can also impact public transportation services, making commuting less reliable and convenient for service sector employees
- Schools, colleges, and educational institutions can be affected by air pollution. Students and teachers may experience health problems that lead to absenteeism and reduced academic performance. Additionally, schools may need to invest in air purification systems, adding to their operational expenses.
5. Way forward
Air pollution can have wide-ranging and adverse impacts on the service sector, affecting health, productivity, revenue, and the overall economic viability of service-based businesses. Reducing air pollution and implementing measures to protect employees and the public is essential to mitigate these impacts.
Source: indianexpress
