At the World Economic Forum in Davos this month, Harvard economist and former IMF Chief Economist Gita Gopinath issued a stark warning: unchecked pollution poses a far greater threat to India's economy than any trade tariffs. Her statement, delivered on a global stage, underscores a critical truth that environmental economists have long documented—air pollution is not merely a public health crisis but an economic emergency.
The Hidden Economic Burden of Pollution
Dirty air inflicts massive, measurable economic harm beyond the obvious health costs. According to recent World Bank research, air pollution imposes global welfare costs of approximately $5.7 trillion annually, equivalent to roughly 4.8 percent of world GDP. This staggering figure results from lost labour income, reduced labour efficiency, healthcare expenses, and diminished economic productivity.
India's Specific Challenges
In India alone, pollution is linked to an estimated 1.7 million deaths each year, accounting for about 18 percent of total deaths. This translates into a substantial economic burden due to lost lives, healthcare costs, and reduced workforce productivity. Air pollution has been estimated to cost India up to $150 billion annually in economic impact. Earlier World Bank estimates pegged this toll at around $80 billion annually, or nearly 1.7 percent of India's GDP, highlighting the persistent long-term drag on growth.
Everyday Economic Losses
These figures manifest in everyday economic losses, such as families draining savings on medical bills, decreased productivity from chronic diseases, and burgeoning public healthcare expenditures. In cities like Delhi, recent official data shows the city met national air quality standards on only 156 out of 365 days in 2025, with near-daily violations of safe PM₂.₅ levels and virtually no compliance during winter months.
Policy Implications and Calls for Action
Gopinath's intervention draws attention to the massive "hidden tax" that dirty air imposes on economic growth. Her statement is not merely commentary; it is a call to reframe environmental policy as economic policy. Economists have long warned that environmental externalities, when left unchecked, can slow development, reduce national competitiveness, and disproportionately harm vulnerable populations.
As India pursues ambitious development goals—expanding cities, building industrial capacity, and attracting investment—ignoring pollution's economic toll is not just a health oversight; it is economic mismanagement. What India now requires is policy seriousness commensurate with the scale of the costs.
Pathways to Solutions
Strengthening clean air regulations, investing in clean energy, sustainable transport, waste management, and regional airshed governance are economic necessities. Reducing PM₂.₅ by meaningful margins will generate dividends in reduced healthcare costs, higher productivity, and longer, healthier lives, particularly for children and vulnerable populations disproportionately affected by dirty air.
The debate must move beyond whether pollution matters to how quickly and effectively action can be implemented. The cost of inaction is already measurable—and rising. Acting decisively today could unlock substantial economic and health dividends for generations to come.
