UPDATED: April 21, 2021 19:30 IST
The rising level of air pollution in India is not just bad for health, but equally harmful for businesses operating in the country. A study conducted by consulting firm Dalberg Advisors in partnership with Clean Energy Air Fund and Confederation Indian Industry (CII) estimates that Indian businesses suffer a cumulative loss of Rs 7 lakh crore or $95 billion, equivalent to 3 per cent of India’s GDP, annually.
The report, titled ‘The Silent Pandemic’, suggests that India is “in the midst of a pollution pandemic” citing a World Air Quality report from 2019. According to the report, India ranked 5 out of 98 countries in 2019 based on weighted average PM2.5 concentration levels, behind Bangladesh, Pakistan, Mongolia, and Afghanistan.
“Twenty-one of the world’s 30 cities with the worst air pollution are in India. New Delhi has the poorest air quality among cities globally, with PM2.5 concentration levels nearly ten times the WHO target. PM2.5 levels have remained alarmingly high over the last five years,” the report noted.
“Air pollution costs Indian businesses Rs 7 lakh crore or $95 billion every year,” it added.
IMPACT OF AIR POLLUTION ON BUSINESSES
The report indicated that air pollution hurts Indian businesses in six primary ways — lower labour productivity, lower consumer footfall, premature mortality, lower asset productivity, increased health expenses and welfare losses.
“The cost of air pollution manifests in 6 ways — lower labour productivity, lower consumer footfall, premature mortality, lower asset productivity, increased health expenses and welfare losses. Out of these, employee productivity, consumer footfall and premature mortality impact businesses directly,” it noted.
It also highlighted that at least 1.3 billion days working days were lost in India in 2019 due to absenteeism. This resulted in a revenue loss of $6 billion. “As air pollution rises, employees fall sick themselves or stay at home to take care of dependents such as children and the elderly, who are more vulnerable to air pollution,” the report said.
Air pollution also impacts employees’ physical and cognitive performance. “Business heads estimate that employee productivity decreases by 8-10 per cent on high pollution days, costing $24 billion in 2019,” it said.
Another negative impact air pollution has on businesses is lower consumer footfall. According to the study, air pollution diminished India’s strength of being a large consumer economy by reducing consumer spending by at least 1.3%, costing approximately $22 billion in 2019.
“As air pollution rises, consumers avoid exposure to pollutants, akin to what was observed during the Covid-19 pandemic,” it added.
Premature mortality due to air pollution is another factor that harms businesses in India. “Air pollution contributes to 18 per cent of all deaths in India. India lost 3.8 billion working days in 2019, costing $44 billion to air pollution caused by deaths,” the report said.
“Not only premature mortality devastate our current workforce, but also the workforce of the future, with children under the age of 1 contributing to 34 per cent of the total impact. As India’s population’s median age increases from 27 in 2019 to 32 in 20302, its susceptibility to air pollution will increase, raising the question of a sub-optimal workforce.”
The study suggests that all the aforementioned factors have a devastating impact on Indian businesses, and is equal to 150 per cent of the country’s healthcare budget, 150 per cent of the country’s defence budget and 50 per cent tax collected annually.
AIR POLLUTION VERSUS COVID LOSS
The loss suffered by Indian businesses each year is equal to 40 per cent of the country’s outlay on managing the Covid-19 pandemic, suggested the study.
“Cost of air pollution to businesses is equal to 43 per cent of the pandemic’s impact. Unlike the pandemic, this is an annually recurring cost. Despite this, only Rs 4,400 crore has been invested in air pollution, less than 10 per cent of total outlay on Covid response,” the study said.
“In other words, every year air pollution costs India’s businesses close to 50 per cent of the cost of managing the Covid-19 pandemic.”