Pollution as Growth Killer

India’s Outlook Business recently explored the topic of pollution, not just as a threat to health, but as a significant hindrance to economic growth. The article features an interview with the author, who shared insights on the matter. The author responded to a question about whether the demographic dividend necessitates prioritizing growth before addressing pollution.

The demographic dividend refers to a larger population of working-age individuals who can contribute to economic growth. However, the author emphasized that pollution can diminish this potential advantage. A youthful workforce that is less cognitively adept, suffers from more respiratory ailments, and enjoys shorter working lives may be a smaller asset compared to the sheer headcount suggests.

Moreover, the adverse effects of pollution on children's well-being are expected to manifest as reduced productivity in future decades. The author also emphasized that India's pollution is not merely an unintended consequence of economic growth. In fact, much of it originates from non-economic activities. For instance, farmers in Punjab and Haryana burning rice stubble generate more smoke than the country's entire GDP.

Similarly, the burning of garbage, dust on roads, and old coal plants lacking scrubbers are not productive economic activities. The author pointed out that families who cook with wood and dung are polluted due to their poverty. The good news is that cleaning up these sources incurs minimal output loss, and some solutions could even boost economic output.

Nevertheless, the author stressed that bad air acts as a tax on talent. This is because no one desires to visit Delhi during the notoriously polluted months of November. Foreign skilled professionals, companies, and tourists all have alternatives. Clear skies are a compelling selling point for "Incredible India." The article referenced Anumita Roychowdhury, the executive director of research and advocacy at the Centre for Science and Environment.

She argued that the evidence increasingly demonstrates that air pollution imposes substantial economic and health costs on India. Several reputable studies have estimated the magnitude of these losses. For example, a Lancet study concluded that air pollution costs India approximately 9.5% of its GDP. The World Bank estimated the figure to be around 6% of GDP, while a Dalberg consultancy study highlighted substantial losses to Indian businesses, estimating the costs at around 3% of GDP.

The economic impact of pollution is evident in several ways. When people fall ill, there is a significant loss of productivity. Reports have also shown reduced consumer footfall during severe pollution periods in Delhi. Additionally, there are concerns about residents and businesses relocating due to the high levels of pollution, which raises questions about operating in heavily polluted locations such as Delhi.

Thus, the evidence suggests that pollution is undermining economic activity. It is crucial to recognize that even if India continues to experience economic growth, if a substantial portion of that growth is eroded by pollution-related health and productivity losses, the gains will not be fully realized.