Economic toll of air pollution may have cost India 8.5 % of GDP: World Bank Report

Country hit by more than $560-billion worth of loss in welfare and labour output

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For India, the economic toll of rising air pollution may be as high as 8.5% of its GDP in 2013 or more than $560 Billion, a World Bank Report has suggested.

While air pollution has emerged as the deadliest form of pollution and the fourth leading risk factor for premature deaths worldwide, the economic burden it brings along is massive, a new study by a joint study of the World Bank and the Institute for Health Metrics and Evaluation (IHME) has suggested.

The study, released on Thursday, says air pollution robs nations of significant potential to grow, which after being calculated through total 'welfare losses' and loss in labour output, reaches a staggering amount especially for developing countries.

When looking at fatalities across all age groups through the lens of "welfare losses", an approach commonly used to evaluate the costs and benefits of environmental regulations in a given country context, the aggregate cost of premature deaths was more than US$5 trillion worldwide in 2013. In East and South Asia, welfare losses related to air pollution were the equivalent of about 7.5 percent of GDP.

For India, losses under this category add up to $505.1 billion, or approximately 7.69% of its gross domestic product (GDP), in 2013. The country ranks second globally after China in terms of losses incurred.

Between 1990 and 2013, premature deaths from air pollution increased by 94%, leading to damages from ambient PM 2.5 air pollution rising by 63% during this period to $ 3.5 trillion. At the same time, damages from household air pollution from cooking with solid fuels jumped almost four-fold to $1.5 trillion, adjusted to the purchasing power parity (PPP) in 2011.

In terms of loss in labour output, India earns the dubious distinction of securing the top rank among nations in 2013. About $55.39 billion  0.84% of its GDP at the time or was lost due to air pollution and its adverse effects on labour output including loss of man days.

Neighbouring China followed close behind with $44.56 billion, or 0.28% of its GDP, lost due to forgone labour output. Premature deaths due to air pollution in 2013 cost the global economy about $225 billion in lost labour income, or about $5.11 trillion in welfare losses, worldwide, according to the report.

Adding welfare costs and costs of lost labour due to air pollution puts India’s GDP loss at more than 8.5% in 2013. India’s GDP growth at constant prices was less than 7% in 2013-14. So air pollution alone might be offsetting the Indian economy’s growth efforts.

An estimated 5.5 million lives were lost in 2013 to diseases associated with outdoor and household air pollution, causing human suffering and reducing economic development. While pollution-related deaths strike mainly young children and the elderly, premature deaths also result in lost labour income for working-age men and women. 

The report finds that annual labour income losses cost the equivalent of almost 1 percent - 0.83 percent - of Gross Domestic Product (GDP) in South Asia. In terms of welfare losses the figures were a staggering 7.5 percent GDP equivalent.