High levels of air pollution can have a negative effect on economic growth, a new World Bank study based on evidence from India has found. Released in June 2023, the study by the Development Research Group found that a one microgram per cubic metre (1 μg/m3) year over year increase in PM 2.5 (fine particulate matter that is 2.5 microns or less in diameter) reduces the year-to-year change in GDP at the district level by 0.7 percentage points.
“The contemporaneous effect of pollution on changes in GDP appears to be partially offset by higher GDP in subsequent years such that the total impacts are slightly smaller than the immediate effect,” the report added.
Exposure to fine particulate pollution may increase mortality and morbidity among humans, thereby shrinking human capital’s ability and worker productivity. The consequence of this may include an adverse effect on economic activity.
The paper used a novel dataset of changes in the annual gross domestic product of Indian districts to study the impact of changes in the level of ambient PM2.5 on district-level gross domestic product.
“Overall, our results suggest that air pollution imposes meaningful economic costs. Our estimates suggest that lowering air pollution could have led to larger year-to-year changes in India’s GDP in the recent past,” said the report.
Reducing air pollution would itself impose costs, on account of requiring structural changes in India’s business and industry. However, despite this, there are likely significant long-term benefits from reducing air pollution, the paper said.
Read the full paper here