Bengaluru: On January 21, renowned economist Gita Gopinath didn’t mince words. At the World Economic Forum at Davos, Switzerland, she said that air pollution was a far bigger threat to India’s economy than any tariff imposed by the United States on the country. India needs to work on tackling air pollution on “war footing”, she said. Some trolled Gopinath and criticised her comment. But the numbers don’t lie. And experts concur. Science shows that air pollution affects public health, causes premature deaths and negatively impacts crop productivity, to name a few. But despite these disconcerting impacts on India’s economy, the reason that air pollution has not been addressed as a priority is that it is not high enough on the political agenda yet, economists told The Wire. Current policies indicate that there is “no seriousness” in tackling this issue – even when it is clear that limiting air pollution at source is not only possible across several sectors, but also easy and cheap. Many of these actions will also help tackle air pollution fast and that is the need of the hour, they added. How exactly does pollution affect the economy?Air pollution affects economies in multiple ways.First, it has immense consequences on human health, over both the short- and long-term. Studies show how air pollution is linked to not only lung diseases, but also heart disease, fertility, pregnancy and birth weight — even though India’s minister of state for the environment claimed in Parliament in December last year that there is “no conclusive data” to establish a “direct correlation between higher AQI [Air Quality Index, a measure of air pollution] levels and lung diseases”. Diseases and health conditions brought on by air pollution also decrease work productivity. Air pollution also affects cognition: last year, a study found that unhealthy levels of nitrogen dioxide (NO2, a major pollutant emitted by power plants) caused a 377% increase in the likelihood of accidents at work. Premature deaths are a concern too. A study published in the journal Science Advances in 2022 showed that most of the 46 fast-growing tropical cities they studied recorded a “rapid rise” in premature mortality due to anthropogenic air pollution from 2005 to 2018. Mumbai, Bangalore, Kolkata, Hyderabad, Chennai, Surat, Pune and Ahmedabad were among the top 15 cities with the largest increases in the number of premature deaths over the 14-year observation period. The cost of illnesses is dear: the lost output from premature deaths and morbidity attributable to air pollution alone accounted for economic losses of around US$ 28.8 billion and $8 billion in India in 2019, according to a study published in The Lancet Planetary Health.Air pollution impacts crop productivity. Emissions from coal-fired power plants can impact crop yields in a staggering 100-km radius. A study published last year analysed the levels of nitrogen dioxide (NO2) released from coal-fired power plants across India in a radius of up to 100 km. It found that parts of West Bengal, Madhya Pradesh and Uttar Pradesh – which are exposed to high concentrations of coal-linked NO2 – recorded annual yield losses of more than 10% for both rice and wheat. This, the study noted, was equivalent to approximately 6 years’ worth of average annual yield growth in both crops in India between 2011 and 2020. Air pollution also aggravates climate change, and affects both biodiversity and ecosystems – natural assets that people depend on for livelihoods. For instance, a study in 2022 found black carbon deposits in the Satopanth glacier and the Bhagirath-Kharak glacier (both in the central Himalaya, in Chamoli district in Uttarakhand). The sources of this black carbon, per the study, are the highly-polluted Indo-Gangetic Plains (the states and union territory of Delhi-NCR, Punjab, Haryana, Uttarakhand, Uttar Pradesh, Bihar, Jharkhand and West Bengal), as well as wildfires and vehicular emissions in valleys in these areas. Black carbon is bad news: apart from contributing to global warming and in turn accelerating climate change and altering local weather patterns, it also reduces the reflectivity of snow-clad regions. Glaciers, therefore, melt faster and retreat higher. This means more extreme weather events like Glacial Lake Outburst Floods (such as the ones that occurred in Chamoli in 2021 and Teesta, Sikkim, in 2023), and lesser and unpredictable water supply for not just local communities but also densely-populated states in the Indo-Gangetic Plains. Glacier melts also compound sea-level rise – a phenomenon that threatens numerous coastal cities in India including Mumbai and Kolkata.‘Far more consequential than tariffs imposed’On January 21, at the World Economic Forum 2026 at Davos, Switzerland, economist and former deputy managing director of the International Monetary Fund Gita Gopinath said that pollution was a far bigger threat to India’s economy than any tariffs that the United States has imposed on the country. “One of the areas I wanted to point out which we don’t usually talk about when we’re talking about business development is pollution,” Gopinath said. “Pollution is a challenge in India and if you look at the impacts of pollution on the Indian economy, it is far more consequential than any impact of any tariffs that have been put on India so far. If you look at the annual cost to India’s GDP of the level of pollution. And it is not just the effect on economic activity, but the loss of lives. The numbers are really large. Based on a World Bank study from 2022, about 1.7 million lives are lost every year in India due to pollution. That’s 18% of the deaths in India. I think even from any international investor’s perspective who’s thinking of coming in and putting up a shop in India, if you have to live there, and the environment is not of the kind where you feel that it is not going to be consequential for your health, it holds you back. So addressing that on a war footing is critical. This has to be a top mission for India.”Some trolled and criticised Gopinath for the comment. But the numbers don’t lie.The economic impact of air pollution is significant — and much more than the impact of the US tariffs on India, agreed economist E. Somanathan, Professor at the Economics and Planning Unit of the Indian Statistical Institute in Delhi, and Head, Centre for Research on Economics of Climate, Food, Energy and Environment.“The total merchandise exports to the US is 2% of Indian GDP. That is going to fall by maybe 10 or 20% because of these tariffs. So you’re looking at 0.2-0.4% of GDP whereas the loss caused by air pollution is ten times more. In that sense what she [Gopinath] says is something that most people who know about this would say,” Somanathan told The Wire. India’s economy losses pegged at $260 billion A report published on January 28, a week after Gopinath’s comment, showed just how much India is losing due to air pollution. The report – published by Dalberg and the Clean Air Fund – found that in 2024, India’s average PM2.5 (fine particulate matter) level of 50.6 micrograms per cubic metre resulted in USD 260 billion in lost business revenues from pollution-related impacts. This caused a staggering 6% loss to India’s overall GDP due to reduced business outputs. Pollution was particularly high in urban centers, the report noted, adding that PM2.5 concentrations were more than two times the national average in major metro areas such as the Delhi-NCR, creating more than 10% GDP losses within these urban economies.Comparisons with the same team’s (Dalberg and the Clean Air Fund) 2021 study of India’s economic losses due to air pollution show that losses amounted to USD95 billion then, a number equivalent to 3% of India’s GDP. By these estimates, not only have the losses increased now by around 2.7 times, but India’s annual GDP losses due to air pollution have also doubled in 2024.The report provides several comparisons to make sense of these numbers. The total economic impact of air pollution in 2024 was equal to around 90% of India’s GDP growth in 2023-2024. It amounted to approximately 350% of India’s annual health expenditure in 2024; and was also around 300% of India’s annual defence expenditure that year. Per the report, India’s economic loss of USD 260 in 2024 was driven by five main air pollution impacts. One was presenteeism, or reduced on-the-job worker productivity due to pollution-related effects. This likely had the highest impact on economic losses because it impacts the largest share of workers across India’s key revenue generating sectors, according to the report.Others were premature mortality (the cost of forgone labour due to air pollution-linked premature deaths), consumer footfall (revenue loss from decreased consumer spending in outdoor sectors as people tried to avoid high pollution days, absenteeism (expenses incurred from lost labour days due to unplanned sick leaves), and health expenditure – the extra expenses that the government, households, and private insurers had to pay due to air pollution-related diseases.“Collectively, these factors not only create immediate economic setbacks but also undermine India’s long-term economic growth and business resilience,” the report noted.Businesses speak outNumerous reports and studies such as this one and this one too have quantified the loss to the Indian economy due to air pollution over the past few years. And their findings are not theoretical or abstract. Recent news reports show how poor air quality has affected businesses across the country — and they’re speaking up. In a first, large retailers and restaurant chains cited air pollution as one of the factors affecting corporate earnings in the December quarter, reported Economic Times on January 22. Many businesses reported a fall in sales in North India during the winter, it said. It quoted dine-in businesses such as Speciality Restaurants (which manages restaurant Mainland China and Oh! Calcutta) reporting that business fell by 20% year-on-year in north India in the last quarter of 2025 while growing by 7-8% in the rest of India — a rather stark contrast. Elevated pollution levels in northern India reduced consumer mobility and discretionary spending, impacting demand, Financial Express quoted Kavindra Mishra, managing director and chief executive officer of Shoppers Stop as saying. People staying indoors had a direct impact on footfalls, he said.Indeed, there is a large economic cost to air pollution, commented Somanathan. If one were to express the direct productivity losses and losses from sickness and deaths as a percentage of GDP, that would range between 3 and 5%, he said. However, though losses from sickness and death are real losses, they are not counted in the GDP. “That’s because GDP is not a measure of human well-being or human welfare. Yes, when people get richer on average, they are better off; but there are many other things that make people better off. You will not be better off if you’re richer but sicker, or if you lose somebody because they die,” he said.And the direct economic costs of air pollution (such as crop losses and labour productivity losses) that are measured in GDP are also significant, Somanathan added.Solutions are available, gains immense The Dalberg and Clear Air Fund report published on January 28 evaluated 13 high-impact solutions – interventions addressing key polluting sectors such as transport, solid waste, agriculture, residential combustion, construction, road dust, power, industries and monitoring. It includes making it mandatory for thermal power plants to install flue-gas desulphurisation (FGD) systems — a mandate that the union environment ministry itself exempted a majority of power plants from installing in July last year, citing high costs, as The Wire reported. According to estimates, FGD systems can reduce sulphur emissions at source by around 90%. Experts had termed the ministry’s rationale of India witnessing a lack of technology to implement FGD systems as “absurd”.However, costs are not a concern because access to finance is not the core challenge for thermal power plants (TPPs), the Dalbery-Clean Air Fund report noted. This is because around 20% of TPP capacity mandated with FGDs had already secured financing and installed FGDs, and around 60% are in various stages of bids and tenders indicating that financing “has likely been secured or [was] under negotiation”.“Thermal power plant players like CLP and NTPC have demonstrated the financial viability of FGD through syndicated and consortium loans. For instance, CLP’s Jhajjar power plant raised $460M from a banking consortium of 15 banks, while NTPC secured $750M in syndicated loans from Japanese banks for its pan-India FGD rollout,” the report noted.According to the report, the gains that arise if these solutions are implemented are immense. The solutions specified in the report can reduce ~20% of India’s air pollution due to fine particulate matter from current levels while generating a $220 billion “economic opportunity”, creating 1.4 million jobs, reducing 115 million tonnes of annual carbon emissions, and preventing 10 million annual Disability Adjusted Life Years (DALYs).Similarly, the study published last year that looked at the impact of NO2 from coal-fired power plants across India found that eliminating NO2 pollution caused by power plants in a 100-km radius in states that have some cropland within this distance will bring in gains of around 420 million per year for all states put together — from rice crops alone.The benefits are clear. Why then is India lagging behind when it comes to tackling air pollution? “Not high up enough on the political agenda”“There are many things that can be done but the principal thing that is lacking right now is that it is not high up enough on the policy agenda of the government,” said Somanathan. “There are committees and commissions, but they’re all toothless. You have to have real policies and get people who are serious about getting this done…If you do that, you can bring pollution down quite rapidly.”There are some sources of air pollution which are very cheap and easy to clean up, and others that will take longer and are more expensive, he added. For instance, stopping waste from being burnt in Indian towns, cities and the countryside and having a proper waste management system in place would fall in the first category. But it would require organisation — getting local level governments to function properly and making sure they are financed adequately so that there is incentive to do it. Meanwhile, the coal-fired power sector has gotten away with not having any pollution regulations for a long time and that has to change, Somanathan said. For instance, the government has to reverse its decision to exempt a majority of thermal power plants from having flue gas desulphurisation systems in place, Somanathan said. The cost of this is not high; power costs will increase only by 2-3%: “a very small, unnoticeable increase” that is not significant, he told The Wire.“This [exemption of FGD technology] shows lack of seriousness, that they are just not serious about tackling the problem. Every lobby group that says that it is too expensive – these are all completely made-up numbers…These are not too expensive and can be done.”To take action and actually change the situation, the government needs “clear policy direction” and has to implement these policies, acknowledging that air pollution matters. Such policy direction also helps industries to plan, Somanathan added. “Depending on what policy is going to be, if it is going to be stringent then they would need to make corresponding investments. But as long as the signal is that we don’t care, pollute as much as you want, then they are going to make the dirtier investments and those are cheaper…It has got nothing to do with technology, and everything to do with air pollution not being high enough on the political agenda.”