Persistent air pollution across numerous Indian cities is increasingly becoming a critical factor influencing corporate investment decisions and talent strategies. Experts note that deteriorating air quality is compelling businesses to rethink expansion plans and even relocate operations from highly affected regions.
Air Quality Impacts Talent and Location Choices
According to Seema Arora, Deputy Director General and CEO of the Centre of Excellence for Sustainable Development at CII, air quality management has become a crucial consideration for companies, particularly in the service sector like tourism and IT, when selecting locations for new investments or expansion. Arora highlights the difficulty in attracting and retaining talent, especially for new-age companies, as air quality is now a significant concern for potential employees.
Pradeep Singhvi, Executive Director of Energy and Climate Practice at Grant Thornton Bharat, concurs. He points out that Gurugram, a prominent startup hub, has witnessed many startups either moving or expanding into other cities due to poor air quality. Singhvi adds that multinational corporations are increasingly favoring cities with better air quality, such as Hyderabad, over highly polluted areas like Delhi-NCR, recognizing the direct link between air quality and workforce health, productivity, and retention.
Billions Lost: The Economic Cost of Pollution
The economic toll of air pollution on the Indian economy is substantial, as highlighted by several reports. A World Bank report from 2019 estimated that economic losses from premature deaths and morbidity attributable to air pollution amounted to an staggering $36.8 billion in India, representing 1.36% of the country’s Gross Domestic Product (GDP).
Further emphasizing the severity, a study commissioned by the Clean Air Fund (CAF) in partnership with Dalberg Advisors, Blue Sky Analytics, and the Confederation of Indian Industry (CII) in 2020-2021, suggested an even higher cost. This report indicated that air pollution costs Indian businesses approximately $95 billion annually, equivalent to 3% of India’s GDP.
Sectoral Losses Highlight Broad Impact
The CAF study also detailed significant sectoral losses:
- The IT sector faces an estimated loss of $1.3 billion.
- Decreased consumer footfalls cost the economy $22 billion in 2019.
- Reduced tourist footfalls result in a $1.7 billion annual loss for the tourism sector.
Six Ways Air Pollution Impacts Business
The report, titled "Air Pollution and its Impact on Business," explained that the cost of air pollution manifests in six primary ways:
- Lower labor productivity
- Lower consumer footfall
- Premature mortality
- Lower asset productivity
- Increased health expenses
- Welfare losses
Among these, the study specifically highlighted employee productivity, consumer footfall, and premature mortality as directly impacting businesses.
As India continues to grapple with persistent air quality challenges, the ripple effects on business investment, operational choices, and human capital are becoming increasingly undeniable, pushing companies to integrate environmental factors into their core strategic planning.