Pollution and Economic Growth
Context:
As the Budget session unfolded, discussions on economic policies, market indicators, taxes, and subsidies dominated headlines and social media.
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- With inflation soaring for essential commodities and the rupee depreciating against the US dollar, concerns about financial stability took center stage.
- However, a critical issue that rarely makes economic headlines yet poses a significant threat to India’s growth is air pollution—most notably in Delhi but also stretching from Punjab to Assam.
Delhi’s Alarming Air Quality Crisis
- Globally, an Air Quality Index (AQI) below 50 is considered “good air.”
- By this standard, Delhi’s situation is dire. In 2024, the city did not witness a single “good air” day—an unprecedented event in the last six years.
- On December 16, air quality levels plummeted to hazardous levels, prompting authorities to impose Stage IV restrictions under the Graded Response Action Plan (GRAP).
- These restrictions, which included shutting down schools and halting construction activities, highlighted the severity of the crisis.
Health Consequences of Pollution
- Respiratory Issues: Respiratory illnesses have surged across the country due to prolonged exposure to toxic air.
- A 2019 study published in The Lancet revealed that air pollution contributed to 12.5% of all deaths in India in 2017, largely due to particulate matter pollution.
- Research from the University of Chicago further indicates that this level of pollution reduces life expectancy by an alarming 7.8 years.
- Cognitive Decline: More concerning are new studies linking air pollution to cognitive decline.
- According to a Nature article by Liam Drew (January 2025), long-term exposure to polluted air increases the risk of dementia, depression, and anxiety disorders.
- While the wealthy can afford air purifiers or temporary escapes to cleaner destinations, the majority of the population has no such options.
Overlooked Economic Impact
- Silent Killer: Unlike fiscal deficits or trade policies that have visible short-term consequences, environmental degradation slowly erodes economic stability.
- Economic Downfall: Historical evidence suggests that environmental collapse can lead to economic downfall.
- The decline of the Indus Valley Civilization is now attributed to ecological degradation rather than foreign invasions.
- The rulers of that era lacked scientific knowledge to prevent their environmental crisis.
- Lack of Will: Today, however, the Indian government has access to extensive research and expertise but has yet to show strong commitment to tackling this issue.
- Economic Cost: Northern India has witnessed a decline in international tourism, and poor air quality is believed to be discouraging foreign investments.
- Temporary measures like GRAP IV provide short-term relief but disrupt economic activity and daily life, impacting businesses and productivity.
Air pollution is a growing global threat to human and occupational health, the environment, and economies. The market impacts of outdoor air pollution, including effects on labor productivity, health expenditures, and agricultural crop yields, could lead to global economic costs that gradually increase to 1% of global GDP by 2060. Greenpeace research estimates that air pollution costs the global economy $2.9 trillion, corresponding to 3.3% of the world’s GDP. The World Bank estimates that premature deaths due to air pollution cost the global economy about $225 billion in lost labor income in 2013. In 2018, air pollution triggered 1.8 billion days of work absences worldwide.
Call for Urgent Action
- Avoidable Disaster: Air pollution is not an unavoidable natural disaster like an earthquake or volcanic eruption.
- Multiple factors contribute to the crisis, including vehicle emissions, industrial pollution, stubble burning, and household cooking practices.
- Addressing these requires a unified, nationwide strategy rather than fragmented, state-specific responses.
- Role of Union Government: Instead of turning air pollution into an inter-state blame game, the Union government must take responsibility.
- A dedicated budget, scientific studies, and a comprehensive policy framework are essential.
- Others: Other countries, such as China, have successfully tackled air pollution through strict regulations and coordinated efforts—proving that a turnaround is possible.
Fiscal Solution to Fund Clean Air Initiatives
- More Government Expenditure: Implementing an effective pollution control strategy will require increased government expenditure, which may raise fiscal deficits.
- Tax on High Income Individuals: One solution is to impose a special direct tax on high-income individuals for two to three years.
- Tax-to-GDP: India’s tax-to-GDP ratio remains low, with direct taxes accounting for less than 40% of total tax revenue.
- Since indirect taxes disproportionately burden the middle and lower-income groups, restructuring the tax system to fund environmental initiatives is both feasible and equitable.
India’s pollution crisis has reached an embarrassing and dangerous level. Continuing to ignore it will only compound the problem, threatening public health, economic growth, and global standing. The time for action is now. Implementing bold policies and ensuring strict enforcement can reverse the damage and secure a healthier, more prosperous future for the country.
