How Pollution Impacts the Indian Economy

Photo by Yogendra Singh

Abstract

India faces an escalating crisis of pollution that poses a severe threat to economic growth and stability. This research report examines how air and water pollution, particularly in major regions like Delhi and rivers such as the Ganga and Yamuna, is driving health-related costs, productivity losses, and additional burdens on healthcare and insurance. By analyzing economic losses due to declining worker health, rising healthcare expenses, and productivity impacts, this report illuminates the substantial and far-reaching effects pollution imposes on India’s economy. Additionally, recommendations are provided to help mitigate pollution’s economic impact, thereby promoting a sustainable economic future for the country.

Introduction

India’s rapid industrialization and urbanization have led to significant pollution problems, adversely impacting public health, the environment, and the economy. Air pollution in cities like Delhi and water pollution in major rivers such as the Ganga and Yamuna exacerbate public health challenges, elevate healthcare costs, and reduce labour productivity. This study aims to provide a comprehensive analysis of the economic losses driven by pollution-related health and productivity issues and the implications for the broader Indian economy.

Economic Losses from Health Impacts of Air Pollution

Air pollution remains one of the most critical environmental challenges in India. In 2019, air pollution led to an estimated economic loss of $36.8 billion, or approximately 1.36% of India’s GDP, largely due to healthcare costs and decreased productivity (Indian council of Medical Research, n.d.). Delhi, known for its dangerously high air pollution levels, has seen alarming rates of respiratory diseases, cardiovascular conditions, and premature deaths among residents. The high level of particulate matter (PM2.5 and PM10) in the atmosphere creates an immense health burden, impacting the labor force's overall productivity and increasing absenteeism.

The public health implications have direct economic consequences. According to the Lancet Planetary Health Journal, air pollution resulted in more than 1.7 million premature deaths in 2019 alone, contributing to significant economic losses due to reduced workforce participation and increased healthcare expenditures (Balakrishnan, 2018). Specifically, outdoor air pollution has been associated with decreased cognitive function and chronic health conditions, which not only affect individual productivity but also place a strain on healthcare systems and national resources.

Breakdown of Economic Costs from Air Pollution in India (Delhi Example)

(Balakrishnan, 2018)

Sector-Wise Contribution to Air Pollution in India

(Centre for Science and Environment. (2020). State of India’s Environment Report, 2020)

Water Pollution and its Economic Ramifications

Water pollution, particularly in the Ganga and Yamuna rivers, has severe economic implications. The Ganga, often referred to as the lifeline of northern India, supports millions of people and numerous industries. However, it faces extreme levels of contamination from untreated sewage, industrial waste, and agricultural runoff. In a 2018 report, the National Green Tribunal highlighted that nearly 30% of the pollutants in the Ganga come from urban sewage systems, impacting drinking water, agriculture, and local economies (CPCB, 2018)

The contamination of these rivers has a significant economic impact on agriculture, fisheries, and tourism. Water pollution not only reduces crop yield but also diminishes fish populations, which are essential for local economies. The World Bank estimated that water pollution in India reduces agricultural productivity by 9%, contributing to income losses for farmers and related industries (India: Issues and Priorities for Agriculture, 2012). Furthermore, waterborne diseases such as cholera, dysentery, and typhoid are common, resulting in additional healthcare costs and lost productivity.

Health Effects Caused by Water Pollution in India (Ganga River Basin)

(CPCB, 2018)

Insurance and Healthcare Costs Linked to Pollution

The rising incidence of pollution-related illnesses has contributed to an increase in healthcare and insurance costs in India. For instance, Delhi’s escalating pollution levels have led to a surge in health insurance claims, with respiratory and cardiovascular diseases accounting for a significant portion of claims. Health insurers are facing an increased number of claims due to illnesses directly linked to pollution, which, in turn, raises the overall insurance premium rates. As premiums rise, it becomes more costly for businesses to provide employee health coverage, further impacting operational expenses and profits.

Moreover, the National Health Policy (2017) estimated that India’s pollution-related diseases could cost nearly 1% of GDP annually due to healthcare and loss of productivity (National Health Policy, 2017).This cost burden translates to higher out-of-pocket spending for individuals and families, reducing disposable income and curbing consumer spending, thereby impacting the economy.

Impact on Tourism and Related Sectors

Pollution also affects tourism, a significant economic contributor. India’s rivers, national parks, and heritage sites attract millions of visitors annually. However, air and water pollution deter tourists, negatively impacting tourism revenue. For example, Agra, home to the Taj Mahal, faces severe air pollution, which often results in advisories against visiting due to health risks associated with high PM2.5 levels (Thick haze clouds Taj Mahal as pollution rises, frustrates tourists, 2024). The declining air quality not only impacts tourism revenue but also creates additional costs for maintenance and restoration of cultural monuments exposed to pollution damage.

Diminishing Labor Productivity

Pollution’s effects on productivity, particularly among outdoor workers, are also economically significant. Reduced air quality limits physical capacity, affecting industries that rely on manual labor. A study by the International Labor Organization (ILO) found that because of air pollution, productivity in India could decline by as much as 5% in high-impact sectors such as construction and agriculture (Working on a warmer planet: The impact of heat stress on labor productivity and decent work, 2019). This decreased productivity has a direct economic impact by reducing the potential output of these sectors and discouraging foreign investments in polluted areas.

Policy Recommendations

To mitigate the economic impact of pollution, India must adopt comprehensive measures that address both air and water pollution. These measures include:

1. Strengthening Regulatory Frameworks: India needs stringent enforcement of pollution control measures, including penalties for non-compliance by industries, improved waste management practices, and investments in green infrastructure.

2. Promoting Renewable Energy: Transitioning to clean energy sources, such as solar and wind, can reduce air pollution and lower healthcare costs related to pollution. The government’s initiative to install 450 GW of renewable energy by 2030 is a significant step in this direction (India set to hit 450 GW renewable energy installed capacity by 2030: MNRE, 2021).

3. Enhancing Public Awareness and Education: Increased awareness programs on pollution control can encourage public participation and behavioral change to reduce pollution at the source, fostering community-led initiatives for cleaner rivers and cities.

4. Investing in Healthcare Infrastructure: Expanding healthcare access and resources for pollution-related diseases can reduce economic losses and ensure a healthier workforce, contributing to productivity and long-term economic growth.

   
   

Conclusion

Pollution remains a significant economic challenge for India, with substantial impacts on public health, productivity, and the nation’s overall economic potential. Air and water pollution in regions like Delhi and the Ganga and Yamuna rivers exemplify how environmental degradation drives healthcare costs and reduces productivity. Through effective policy implementation, regulatory reforms, and public engagement, India can mitigate these economic losses, enabling sustainable development and safeguarding public health. The economic gains from pollution control will not only benefit us but will also create a better future for generations to come.

References

Balakrishnan, K. D. (2018). The impact of air pollution on deaths, disease burden, and life expectancy across the states of India: the Global Burden of Disease Study 2017. Retrieved from pubmed: https://pubmed.ncbi.nlm.nih.gov/30528905/

Centre for Science and Environment. (2020). State of India’s Environment Report 2020. (n.d.). Retrieved from indiaenvironmentportal: https://www.indiaenvironmentportal.org.in/content/470620/the-state-of-indias-environment-2020/

CPCB. (2018). Ganga River pollution study and intervention report. Retrieved from GreenTribunal: https://greentribunal.gov.in/sites/default/files/news_updates/REPORT%20BY%20CPCB%20IN%20OA%20NO.%20673%20of%202018.pdf

India set to hit 450 GW renewable energy installed capacity by 2030: MNRE. (2021). Retrieved from Business Standard: https://www.business-standard.com/article/economy-policy/india-set-to-hit-450-gw-renewable-energy-installed-capacity-by-2030-mnre-121101100921_1.html

India: Issues and Priorities for Agriculture. (2012). Retrieved from World Bank: https://www.worldbank.org/en/news/feature/2012/05/17/india-agriculture-issues-priorities

Indian council of Medical Research, P. H. (n.d.). India: Health of the Nation’s States,. Retrieved from Healthdata: https://www.healthdata.org/sites/default/files/files/policy_report/2017/India_Health_of_the_Nation%27s_States_Report_2017.pdf

National Health Poicy, 2017. (n.d.). Retrieved from Ministry of Health and Family Welfare: https://mohfw.gov.in/sites/default/files/9147562941489753121.pdf

Thick haze clouds Taj Mahal as pollution rises, frustrates tourists. (2024). Retrieved from Mid-Day: https://www.mid-day.com/news/offbeat-news/article/thick-haze-clouds-taj-mahal-as-pollution-rises-frustrates-tourists-23418743

Working on a warmer planet: The impact of heat stress on labor productivity and decent work. (2019). Retrieved from International Labour Organization: https://www.ilo.org/sites/default/files/wcmsp5/groups/public/@dgreports/@dcomm/@publ/documents/publication/wcms_711919.pdf