11 May 2021
Home to 21 of the world’s 30 most polluted cities, India faces a serious air pollution crisis.
As the world’s fifth most polluted country, the Government’s remedial steps focus mostly on the public health implications. However, air pollution is impacting Indian businesses also. A recent report, ‘Air pollution and its impact on business – the silent pandemic’ seeks to quantify the impact of air pollution on Indian businesses using three primary methods.
The report, led by Dalberg Advisors in partnership with CII and Clean Air Fund estimates that toxic air costs Indian businesses USD 95 billion per year (or 3% of the country’s GDP) in 2019. This is the first of its kind research looking at air pollution in the country – combining big data analytics and survey data insights to offer new insights into the impact on the Indian economy and workforce.
Key findings of the report:
Pollution claimed 1.7 million premature deaths in 2019, 18% of all deaths in India, a figure that’s only projected to increase by 2030. In economic terms, these lost working years cost the Indian economy USD 44 billion in 2019
Estimates have shown that Indian workers take 1.3 billion days off annually because of the adverse effects of air pollution on their health, amounting to USD 6 billion in lost revenue
Air pollution has been shown to have significant effects on workers’ cognitive and physical performance, lowering their on-the-job productivity and thereby decreasing business revenues by up to USD 24 billion
The productivity costs of air pollution go beyond absenteeism as employees overwork to compensate for the lost productivity, leading to burnout and attrition. These effects result in a 8-10% decrease in productivity and therefore loss of output; which are more pronounced in cognitively-demanding professions. This pollution-induced presenteeism, leads to 0.84% loss in GDP, representing 26% of overall impact of air pollution
As the average age of India increases from 27 in 2019 to 30 in 2025 and 32 by 2030. Because older people are more vulnerable to the impact of air pollution, the proportion of deaths and illness among the workforce could rise exponentially.
Sectoral assessments show:
India’s IT sector, the source of 9% of the country’s GDP and a magnet for foreign investment, is disproportionately affected, losing USD 1.3 billion (1% of sector value) 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
Further impacting the national economy, the report found that lower air quality also reduces consumers’ willingness to venture out of their homes, leading to lower footfall and ultimately USD 22 billion less revenue for consumer-facing businesses
Tourism sector faces 1% impact on GDP with USD 2 billion lost. It also lead to employment loss for 820000 professionals due to losses in domestic tourism. The impact is two-fold: either tourist decide not to travel, or have a lower quality experience if they choose to travel. These impacts expose India’s economy to drastic short-term losses, as well as longer-term loss of competitiveness due to reputational risks
The impact of air pollution goes beyond people, reducing the productivity and lifespan of assets. Every 100 unit increase in PM 2.5 levels beyond 100 μg/m3 reduces solar panel productivity by 13% and by 23% beyond 250 μg/m3. This ultimately leads to 12% increase in breakeven period and 67% loss in cost advantage of solar vs coal.
This study ultimately aims to motivate businesses and policymakers to become more active advocates for clean air by showing how much the economy and society stands to gain. The report is premised on the principle that the private sector can and should join forces with Government, researchers and civil society to improve air quality successfully. To download the full report, click here.