Dirty air equals slower growth

When Gita Gopinath observed at the World Economic Forum in Davos that air pollution inflicts more economic damage on India than tariffs, she was not offering a provocation for effect. She was making a macroeconomic diagnosis. At a time when global trade barriers dominate headlines and policy attention, her remark pointed to a quieter, more persistent and largely self-inflicted drag on India’s growth.

Tariffs command attention because they are external, visible and political. They invite negotiation, retaliation and adjustment. Air pollution is treated very differently. It is framed as a seasonal inconvenience, a public health concern or an environmental problem, rarely as a core economic issue. Yet the evidence increasingly suggests that polluted air erodes India’s economic potential more deeply and more consistently than most trade shocks.

Gopinath’s argument rests on a growing body of research that treats air pollution as a measurable macroeconomic constraint. Seen through this lens, India’s air quality crisis is not a peripheral policy failure. It is one of the country’s most expensive.

At Davos, Gopinath cited research showing that around 1.7 million lives are lost every year in India due to air pollution, roughly 18 per cent of all deaths. These estimates, drawn from World Bank backed studies such as the Global Burden of Disease and the State of Global Air reports, are the product of more than a decade of work combining satellite data, ground level air quality measurements, demographic surveys and disease registries.

The methodology is rigorous and increasingly refined. Researchers assess long term exposure to pollutants such as PM2.5 and model how this exposure raises the risk of cardiovascular disease, stroke, lung cancer and chronic respiratory illness. The crucial step is the counterfactual. How many of these deaths would not have occurred if pollution levels were minimal. That difference forms the basis of pollution attributable mortality.

What is striking is how sharply these estimates have risen. In 2010, outdoor air pollution was estimated to cause about 627,000 deaths annually in India. By 2019, the figure had climbed to around 1.67 million. More recent estimates suggest that annual deaths now exceed two million, placing India among the countries with the heaviest air pollution burden globally.

Some researchers argue that even these figures understate the scale of the problem. A 2024 study published in Lancet Planetary Health, using district level death registration data and high resolution satellite pollution mapping, found significantly higher mortality when exposure was measured against World Health Organisation standards rather than India’s more permissive national limits. The choice of benchmark matters, because it determines how much exposure is deemed harmful.

Mortality figures alone, however, do not explain why economists compare pollution to tariffs. The comparison becomes sharper when these health impacts are translated into economic costs.

Using Global Burden of Disease data, scientists from the Indian Council of Medical Research estimated that in 2019 India lost roughly 36.8 billion dollars in economic output due to pollution related premature deaths and illness. This figure was calculated as the cost of lost output, essentially the productive income foregone because people died early or were unable to work. It amounted to about 1.36 per cent of GDP.

Other estimates are higher, depending on methodology. The 2025 Lancet Countdown Report put the monetised value of lives lost prematurely to air pollution at close to 339 billion dollars, nearly 9.5 per cent of GDP, using broader valuations of mortality. Greenpeace South Asia has estimated annual losses of around 150 billion dollars from fossil fuel related air pollution alone. A World Bank analysis published in 2023 suggested that India’s GDP growth itself has been constrained by rising pollution, estimating that output in 2023 could have been more than four per cent higher if pollution had been reduced substantially over the previous 25 years.

These numbers vary because they measure different things. Some focus narrowly on lost labour output, others include broader valuations of life and health. But the direction of travel is consistent. Air pollution imposes a large, recurring economic cost that rivals or exceeds the impact of most external trade shocks India has faced.

This helps explain why tariffs, for all their drama, often look smaller by comparison. Tariffs typically affect specific sectors and are shaped by negotiation and adjustment. Firms reroute supply chains, governments offer relief and markets adapt. The economic pain is real, but it is often bounded and reversible.

Pollution behaves differently. It affects the entire economy, every day. It reduces labour productivity even on days when no one falls seriously ill. It raises healthcare expenditure, squeezes household consumption and weakens the attractiveness of Indian cities to investors and skilled workers. For international firms, persistent air quality failure is not just a health risk but a signal of governance capacity, coordination and regulatory credibility.

This is the contrast Gopinath was drawing. Tariffs test an economy’s negotiating skill. Pollution tests its ability to govern itself effectively.

India’s difficulty is not a lack of knowledge. The sources of pollution are well documented and widely accepted. The problem lies in how the state responds. Air quality management remains fragmented across ministries, states and municipalities, with overlapping authority and weak accountability. Policy is dominated by emergency measures, seasonal bans and judicial intervention, rather than sustained, enforceable action.

As a result, pollution is treated as a recurring crisis rather than as a structural economic constraint. That mismatch is increasingly hard to justify. A drag that erodes national income year after year cannot remain peripheral to economic strategy.

What follows from this is not a dismissal of trade policy. Tariffs matter, and trade diplomacy will remain central in a volatile global economy. But priorities matter too. Clean air needs to be recognised as a form of economic infrastructure, essential to sustaining productivity, labour participation and urban competitiveness. Air quality outcomes must shape how cities are funded, how infrastructure is planned and how industrial growth is regulated.

Fiscal choices also need to reflect the scale of the damage. Token allocations and pilot schemes are misaligned with a problem that costs the economy over one per cent of GDP annually. Equally important is governance. Clearer responsibility between levels of government, fewer discretionary exemptions and consistent enforcement would do more to improve air quality than another cycle of emergency restrictions.The global economy will adjust to tariffs, through rerouting, repricing and negotiation. There is no comparable adjustment mechanism for chronic air toxicity. India’s long term growth story will be shaped less by the trade barriers it faces abroad than by the everyday economic damage it continues to tolerate at home.