Air pollution not only bad for health but for economy too; costs nearly double of India’s fiscal deficit

November 13, 2020 3:08 PM

The overall economic cost of air pollution is estimated at around 7% of GDP or 14 lakh crores, which is almost twice the fiscal deficit of our nation.

air pollution, economic loss, pollution hits gdp, impact of pollution on economyFirst, the pollution intensity in the region varies as per concentration of economic activities and urbanisation.

Divakar Vijayasarathy

In the words of the Father of our nation, “action expresses priorities”, irrespective of our statements, what we do means where our focus is. Covid has taught us what can be done with collective deliberate action. India, at least statistically, has been at the forefront of Covid management by accounting for just about 10% of fatalities with nearly 18% of the global population. While the paranoia around Covid has ensured sustained collective action despite incurring huge economic costs, a similar yet far lethal pandemic has been left to thrive and plague humanity for decades now- Air pollution. Globally ambient (outdoor) and household air pollution are estimated to cause over 8 million premature deaths and one in every five deaths is from India. To give a perspective, India has 1.26 lakh deaths owing to Covid so far however in 2019 alone we have had 1.6 million deaths from air pollution.

According to the World Health Organisation (WHO) the sustainable pollution metrics for safe human inhabitation are:

  • PM 2.5 (fine particulate matter) – 10 mg per cubic meter (10μg/m3) and;
  • PM 10 (coarse particulate matter) – 20 mg per cubic meter (20μg/m3)

However, the top ten cities in India have at least fifteen times more particulate matter, for example, Delhi, has a PM 2.5 in the range of 150-410 and PM 10 of 90-700. India is home to 21 of the 30 most polluted cities in the world and ranks third in terms of absolute emissions. Though we rank only 158th on per capita emissions, given the sheer volume and density of our population (395/ sq. km), the problem gets magnified manifold for our landmass. Apart from mortality, air pollution has a tendency to significantly erode the quality of life and health of the population. The deteriorating air quality puts tremendous pressure on our fragile health care system and impairs the productivity of the population, thereby significantly burdening the economy.

  • It is estimated that pollution from fossil fuels leads to around 500 million man-days of work absence annually due to illness.
  • Air pollution from burning fossil fuels costs an estimated 5.4 per cent of India’s GDP.
  • Total per capita government spending on healthcare has nearly doubled from Rs 1,008 per person in FY15 to Rs 1,944 in FY20.
  • The overall economic cost of air pollution is estimated at around 7% of GDP or 14 lakh crores, which is almost twice the fiscal deficit of our nation.

According to OECD, the impact of outdoor air pollution on the global economy shall assume monstrous proportions over the next four decades:

  • Related health care costs are expected to rise from $ 21bn in 2015 to $176 bn
  • Annual lost working man-days to increase to 3.7 bn (from 1.2 bn at present)
  • Market impacts of labour productivity, health expenditures, and agricultural crop yields shall gradually increase to 1% of global GDP
  • Premature deaths are estimated to increase from 3mn to 9 mn
  • India and China are likely to be the most affected given the density of population and rising consumption of fossil fuels.

Considering the imminent and potent implications, Indian policymakers have set bold targets and backed them with affirmative action. At the global level, India has committed to:

  • To reduce the emissions intensity of its GDP by 33 to 35 percent by 2030 from 2005 level
  • To achieve about 40 percent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030
  • To create an additional carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent through additional forest and tree cover by 2030.

While we have made commendable progress on the first two commitments, we are yet to see serious achievements on the carbon sink.
The government has allocated Rs 4,400 crores in Union Budget 2020-21 (a tenfold increase) to Ministry of Housing and Urban Affairs for controlling air pollution in 46 cities with a million people or more. Further various Government schemes like National Clean Air Programme, National Air Quality Monitoring Programme, UJJWALA, ECO Niwas Samhita and Kisan Urja Suraksha Evam Utthaan Mahabhiyan are all beginning to bear fruits.

Amidst all the buzz and noise, Carbon Credit, an initiative which evoked tremendous interest a decade ago is conspicuous by its oblivion. It’s a mechanism by which polluting businesses could purchase credits from non/less-polluting businesses to offset their excessive emissions. Over time, given the high cost of polluting technologies, these businesses were expected to move to cleaner options. A vibrant and thriving carbon credit exchange coupled with a strong enforcement apparatus to transparently measure and award such credits is vital to make it a reality. According to Dr Umakanth Dash (HoD, Humanities IIT Madras) “India has a comprehensive system of guidelines and regulations to moderate air pollution, however, the challenge arises in adherence and implementation. In a developing country, the choice is always between lives versus livelihood and in most cases, the latter triumphs”. Carbon exchange could be a great mechanism to quickly augment the shift to cleaner sources provided the entire machinery is in place to transparently reward, trade and regulate the stakeholders.

While ensuing investments happen with a focus on green tech, existing establishments have minimal incentives to adapt. More than half of India’s electricity sector is still dependant on coal and the outlook for minimising coal dependence seems bleak. The scenario is no different in the automobile space. Dr Jagadish Prasad, Chairman Hyderabad Batteries states that “ for every new vehicle coming on to our roads, there are perhaps 12 to 15 old vehicles that will continue to run. Further, the older the vehicle, the more polluting it is. No attention is being paid to these old vehicles, and no government scheme exists to do anything about them”. Dr Prasad has invented a technology which could retro-fit older vehicles to make them electric and less polluting, however in the absence of policy thrust, there has been a minimal acceptance of the technology.

Air pollution is the largest global war on mankind which has, over the past two decades, inflicted more damage to humanity than both World War I and II together. India has been at the forefront of combating air pollution, however, the innate challenges of being a developing economy with a rising middle class and burgeoning population have created surmountable hurdles. Shifting to green tech, improving public transportation, expanding carbon sink (forest cover) are all solutions we are aware, however, in the absence of an enabling ambience, the progress would be painstakingly slow. Incentivising research, promoting green entrepreneurship, optimizing enforcement and promoting an active carbon exchange are possible paths to a meaningful outcome. As the saying goes, “Effort is important but knowing where to make an effort makes all the difference”.

Divakar Vijayasarathy is Founder and Managing Partner of DVS Advisors LLP. Views expressed are the author’s personal. 

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