Delhi’s air pollution has a high economic cost

Air pollution is no longer an environmental inconvenience; it is an economic shock with persistent and compounding effects. A recent World Bank report (March 2025) estimates that nearly 5 per cent of global GDP is lost annually due to air pollution through reduced labour productivity, lost working days, and shorter life expectancy. The report further highlights an alarming USD 6 trillion in global health expenditures every year attributable to pollution-related illnesses, placing a sustained drag on economic growth. According to the IHME Status of Global Air Quality 2025, 36 per cent of the world’s population lives in economies where PM2.5 levels exceed safe thresholds, with Asia, Africa, and Latin America bearing the brunt.

India sits squarely within this crisis. A Lancet report on Health and Climate Change estimates that more than 1.7 million deaths in India are linked to pollution-related causes, while the State of Global Air Report 2025 places this number at over 2 million deaths annually from exposure to multiple pollutants. Delhi, India’s capital, has emerged as a concentrated symbol of this failure. Each winter, toxic smog does not merely choke the air – it constrains economic activity, disrupts mobility, and erodes human capital. The WHO Ambient Air Quality Report (2023) identifies Delhi’s annual average PM2.5 concentration as 24 times higher than the prescribed safe limit, placing it among the most polluted cities globally.

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Evidence from the Centre for Science and Environment (CSE) attributes this toxic mix primarily to vehicular density, traffic congestion, and local emission sources. Importantly, the report notes that stubble burning impacts have reduced in recent years due to floods disrupting crop cycles, shifting attention back to urban and industrial sources. Despite this, 22 air- quality monitoring stations in Delhi recorded carbon monoxide levels beyond permissible lmits during October–November, underscoring persistent structural problems. According to IQAir, Delhi currently experiences 11 million excess vehicles moving in and out of the city, while coal- and fuel-based industries contribute nearly 18 per cent of total pollution.

The core problem is not the absence of policy intent. Initiatives ranging from electric vehicle adoption and dust control to waste management reforms exist, including 25 distinct action plans under Delhi’s 2025 air pollution mitigation strategy. What remains deeply problematic is fragmented execution, limited integration of the informal sector, and significant resource leakage. Air pollution’s most damaging economic effects surface through public health and labour productivity. The World Bank estimates Delhi’s annual public health cost at USD 36.8 billion, with an additional USD 55 billion lost each year due to illness-related productivity decline.

Empirical studies from Harvard University and the University of Chicago suggest a 3-4 per cent annual productivity loss in Delhi’s outdoor labour sectors caused by continuous exposure to PM2.5. Mortality data reinforce this trajectory. According to IHME, pollution-related deaths in Delhi rose from 15,786 in 2018 to 17,188 in 2023, accounting for nearly 15 per cent of total annual mortality. Respiratory illnesses, particularly bacterial pneumonia, have become more prevalent. A PolicyBazaar.com report indicates that treatment costs for cardiac arrest and respiratory illnesses increased by 6 and 11 per cent respectively, in 2024, while children account for more than half of the rising health insurance claims.

These figures signal a deeper erosion of human capital that conventional GDP metrics fail to fully capture. Delhi’s pollution crisis also undermines its service economy. Winter smog routinely disrupts aviation and rail transport, leading to flight diversions, cancellations, and logistical bottlenecks. As air quality deteriorates, tourists increasingly divert to Himalayan destinations and Uttarakhand, shrinking Delhi’s tourism revenues and local employment. Several countries – including Singapore, the UK, Canada, Malaysia, Taiwan, and Australia – have issued travel advisory for Delhi , while international tourist inflows decline sharply during the winter months. Even medical tourism, though relatively resilient due to superior infrastructure, faces long-term reputational risks. Policy responses remain uneven.

A parliamentary committee recently revealed that Rs 858 crore allocated for clean air initiatives in the 2024–25 Union Budget remained unspent. Earlier, Rs 2,217 crore was allocated in 2021–22 for clean air programmes across 42 urban centres, alongside targeted interventions in Delhi, Punjab, Haryana, and Uttar Pradesh. India’s COP26 Panchamrit commitments, green bonds, circular economy initiatives, and Delhi’s Rs 300 crore allocation in the 2025 budget – with an additional Rs 20 crore for NGOs – reflect ambition.

Yet under-utilisation, weak regulation, inadequate R&D funding , and limited citizen coordination continue to blunt the impact. Delhi’s pollution crisis is no longer a question of awareness or intent. It is a test of whether economic policy can move beyond fragmented responses to safeguard productivity, public health, and long-term growth. Without decisive coordination, pollution risks becoming an accepted – yet devastating – cost of doing business.

(The writers are Assistant Professors in Economics at IIT Jodhpur. The views expressed are personal and do not necessarily reflect the views of IIT Jodhpur or any government body.)