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Ecology & Environment
Mahesh

04/11/23 07:06 AM IST

Impact of air pollution on economic growth

In News
  • A slew of studies have shown a direct and serious impact of air pollution on GDP growth and per capita income levels.
  • Workers' output declines, fewer consumers avail of consumption-led services, the productivity of assets is hampered, and health expenses soar.
Impact on Economic growth
  • The Reserve Bank of India’s Department of Economic and Policy Research (DEPR) said in its latest report on Currency & Finance 2022-23 that up to 4.5% of India’s GDP could be at risk by 2030 due to lost labour hours from climate change issues, including extreme heat and humidity.
  • If the impact of recurrent annual cycles of pollution in key manufacturing and services hubs is added to that estimate, the drain on economic productivity is far higher.
  • A June 2023 World Bank paper pointed to clear evidence that the well-documented micro-level impacts of air pollution on health, productivity, labour supply, and other economically relevant outcomes aggregate to “macro level effects that can be observed in year-to-year changes in GDP”.
  • A 2021 paper in The Lancet Planetary Health, which studied the direct impacts of air pollution in India on mortality and morbidity, found large inter-state variations in economic loss as a proportion of the state GDP — from 0.67% to 2.15% — with the biggest losses in the low per-capita GDP states of Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh, and Chhattisgarh.
  • A first-of-its-kind report from Dalberg Advisors, in partnership with Clean Air Fund, Blue Sky Analytics, and the Confederation of Indian Industry, had estimated that air pollution entailed costs of about $95 billion annually for Indian businesses, which is about 3% of India’s GDP.
The 2021 study quoted above collated anecdotal evidence from across India:
  • footfall in Mumbai’s Linking Road shopping district dropped by 5% during the highly polluted period between November and January; 
  • a rooftop solar company reported a 13% decrease in the productivity of its solar panels on high pollution days, thereby reducing economic viability for solar in India; and 
  • employees at Bengaluru’s tech hub, Whitefield Corporate Zone, reported an 8-10% reduction in productivity at work.
The costs of poor air quality, the study said, was manifested in six distinct ways:
  • lower labour productivity,
  • lower consumer footfall,
  • lower asset productivity,
  • increased health expenses,
  • welfare losses, and
  • premature mortality.
  • To calculate the impact of air pollution, the analysis used big data analytics, a primary survey, existing literature, and inputs from diverse stakeholders including academic experts in air pollution, along with cross-sectoral business heads and service providers.
Challenge for India
  • Air pollution is an urgent prerogative in India, as more than 20 of the world’s 30 cities with the worst air pollution are in the country.
  • Delhi has the poorest air quality among cities globally, with PM2.5 concentration levels pegged at nearly 10 times the WHO target.
  • A paper in The Lancet had listed Delhi as the city with the highest level of per-capita economic loss due to pollution among major Indian cities.
  • With the air quality plummeting to the “severe plus” category recently, emergency measures, including a ban on trucks and all types of construction are set to be enforced in the National Capital Region.
  • A report by Greenpeace Southeast Asia and the Centre for Research on Energy and Clean Air said the costs of air pollution from fossil fuels, burning gas, coal, and oil results in three times as many deaths as road traffic accidents worldwide.
  • According to the study, air pollution has an economic cost of $2.9 trillion, about 3.3 per cent of the world’s GDP.
  • As pointed out in the RBI report, the trend is a concern especially in developing countries such as India when employment generation is still largely linked to economic activities involving the outdoors — agriculture and construction are among the biggest employment avenues, while delivery services and security agency work account for the bulk of employment generation options in the urban areas.
Impact on Service sector
  • Even in indoor jobs such as those in call centres, air pollution takes a toll on productivity.
  • The study found that for each 10-unit increase in the API, worker productivity, measured by the number of calls handled, fell by 0.35%.
  • While the average duration of individual calls was not impacted by pollution levels, the time workers spent on break went up.
  • Also, poor air quality impeded the performance of otherwise highly productive employees as much as it did of less productive workers.
  • The findings of this study are of particular relevance to India, where the services sector accounts of more than 50% of the GDP.
Source- Indian Express

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