Why Gita Gopinath's framing of air pollution as an economic crisis could finally force policymakers to act

My younger son developed his first serious respiratory infection during Delhi's November pollution season three years ago. He was one. The paediatrician prescribed nebulisers and steroids, shrugged at my questions about prevention, and sent us home with a bill for ₹3,200. That evening, I calculated: nebuliser rental, medications, two missed workdays, an auto to the clinic because the Metro felt too crowded with a wheezing child. Roughly ₹8,000 for one family, one episode, one week.

I am a development economist. I know how to count things. But sitting in that clinic waiting room, watching other parents with other wheezing children, I realised I had never thought to count this. Not properly. Not in a way that might matter to the people who make policy.

Multiply my ₹8,000 across 1.4 billion people breathing toxic air, and you begin to understand why Gita Gopinath's intervention at Davos last week matters.

What Gopinath Actually Said

Speaking at the World Economic Forum on January 22, the IMF's First Deputy Managing Director made a claim that cut through the usual diplomatic hedging. Air pollution's impact on India's economy, she said, is "far more consequential than tariffs."

This was not a throwaway line. Gopinath was deliberately reframing a crisis that Indian policymakers have stubbornly categorised as a "health issue" or an "environmental concern." In Indian political economy, these categories translate to "someone else's problem" or "can be addressed later." By comparing pollution to tariffs, she made it legible to the people who actually control budgets. Finance Ministers understand tariffs. They understand trade barriers. They understand economic costs.

The response was immediate. Within a week, the Bombay High Court cited Gopinath's Davos statement while hearing a PIL on Mumbai's air quality. I cannot recall another instance of an Indian court citing IMF economic analysis in an environmental case.

How Economists Actually Count Pollution Costs

The numbers Gopinath cited deserve examination. Not because they are controversial, but because understanding how economists arrive at them reveals why the economic framing is powerful.

When economists calculate the cost of pollution deaths, they use something called the Value of Statistical Life (VSL). This is often misunderstood. VSL is not a claim about what a human life is "worth" in some moral sense. It represents how much people are collectively willing to pay to reduce their mortality risk. The concept comes from labour economics: how much extra do workers demand to take dangerous jobs? How much do consumers pay for safety features?

The US Environmental Protection Agency uses a VSL of approximately $7.4 million (in 2006 dollars). India's VSL estimates are lower, typically $0.5-1.5 million, reflecting lower incomes and different willingness-to-pay calculations. But even at these values, the arithmetic is devastating when applied to pollution mortality.

The Global Burden of Disease study, published in The Lancet, estimated 1.67 million deaths attributable to air pollution in India in 2019. That represented roughly 17.8% of all deaths in the country. The State of Global Air 2025 report puts the figure at approximately 2 million deaths in 2023. India accounts for roughly a quarter of global air pollution deaths despite having 18% of the world's population.

The Lancet Countdown Report monetised these losses at $339 billion in 2022 alone. That is 9.5% of GDP.

Beyond deaths, pollution extracts costs through what economists call "morbidity effects." These include lost workdays, reduced productivity while working (people show up but cannot perform), increased healthcare expenditure, and cognitive impairment that affects children's learning outcomes.

The OECD estimates that 1.2 billion workdays are lost globally each year to air pollution, a figure projected to reach 3.7 billion by 2060. In India specifically, a Dalberg analysis calculated that reduced productivity, work absences, and premature deaths cost the economy approximately $95 billion, or 3% of GDP, in 2019.

Perhaps the most striking finding comes from a World Bank working paper. The researchers estimated that India's GDP would have been 4.5% higher by the end of 2020 had pollution growth been reduced by half over the previous 25 years. The study found that higher annual exposure to fine particulates reduces district-level GDP growth by approximately 0.56 percentage points. This effect compounds over time.

The World Bank's headline figure, the one Gopinath referenced, estimates air pollution cost India approximately $36.8 billion in 2019, equivalent to 1.36% of GDP. To put this in perspective: India's entire education budget in 2019-20 was approximately ₹94,853 crore, roughly $13 billion. Pollution costs the economy nearly three times what we spend educating the next generation.

The Business of Breathing

The economic effects ripple through the private sector in ways that are only now becoming visible in corporate disclosures.

When Shoppers Stop explicitly blamed air pollution for reduced consumer demand in Q3 FY2026, it marked a shift. Retailers had previously attributed sales declines to "seasonal factors" or "consumer sentiment." Now they are naming pollution directly in investor communications. The logic is straightforward: when air quality indices cross 400, people stay home. They do not shop. They do not eat at restaurants. They do not take their children to amusement parks.

The hospitality industry has begun quantifying this. Hotels in Delhi and NCR report occupancy declines of 15-25% during severe pollution episodes. International tourists increasingly avoid November and December, what should be peak season. Conference organisers have started adding "air quality contingency" clauses to contracts, allowing cancellation if AQI exceeds certain thresholds.

Real estate markets are responding too. Properties in less polluted areas command premiums that were not visible a decade ago. Air purifier ownership has become a marker of middle-class status. The market for N95 masks, once a medical speciality item, is now a consumer goods category.

All of this represents economic activity that would not exist if the air were clean. The air purifier market is not a sign of prosperity; it is a sign of failure.

The Measurement Problem (And Why It Doesn't Matter As Much As You Think)

None of this is to suggest that economic measurement of pollution costs is straightforward. The methodologies involve substantial uncertainty.

Cost-of-illness studies count direct healthcare expenditures but often miss indirect costs like productivity losses or caregiver time. VSL estimates vary enormously across countries and studies because they depend on local income levels and risk preferences. Integrated Assessment Models require assumptions about discount rates and technological change that can dramatically alter conclusions. Attribution is difficult: how do you separate pollution's effect from poverty, malnutrition, or inadequate healthcare?

The honest economist's answer is: we know pollution is enormously costly, but the precise figure could be anywhere from 1% to 10% of GDP depending on methodology and scope. The commonly cited figures are likely conservative. They do not fully capture effects on agricultural yields, tourism, cognitive development in children, or the accelerated depreciation of buildings and infrastructure.

But this uncertainty cuts both ways. It is not an argument for inaction. If the true cost is somewhere between 1% and 10% of GDP, that is an enormous range, but the bottom of that range is still catastrophic. A policy problem that costs "only" 1% of GDP annually would be a national emergency if it were anything other than pollution.

And the uncertainty is declining. Better monitoring networks, improved satellite data, longer time series, and more sophisticated econometric techniques are narrowing the confidence intervals. The direction of findings has been remarkably consistent across studies: pollution is extremely costly, and India bears a disproportionate share of the global burden.

Why Economic Framing Matters Politically

The pollution crisis has been documented for decades. What has been missing is not data but political salience. And political salience in India follows money.

When pollution is framed as a health issue, responsibility diffuses across ministries. The Ministry of Health can point to the Ministry of Environment. The Ministry of Environment can point to the Ministry of Transport. The Ministry of Transport can point to State Governments. Everyone is responsible, which means no one is responsible.

When pollution is framed as an environmental issue, it becomes "sustainable development," a category that in Indian planning has always meant "nice to have, not essential." Environmental clearances can be expedited. Pollution control boards can be defunded. Green tribunals can be ignored. The political cost of inaction on environmental issues has historically been low because the people who suffer most from pollution are not the people who make policy.

But when the IMF's second-most-senior official declares that pollution costs more than tariffs, she is speaking the language of the Commerce Ministry, the Finance Ministry, the PMO. She is saying: this is not a tree-hugging concern. This is money leaving your economy. This is GDP growth you are forfeiting. This is competitiveness you are sacrificing.

The framing change matters because it shifts the political coalition that might demand action. Environmental activists have been demanding cleaner air for decades. They have achieved relatively little because they lack political power. Business associations demanding protection from economic losses speak a different language. They have political power. If pollution control becomes a business competitiveness issue rather than an environmental issue, the political calculus changes.

Consider what happened when Shoppers Stop, one of India's largest department store chains, explicitly blamed air pollution for a demand decline in Q3 FY2026. When retailers are citing pollution in their investor calls, the issue has crossed from activism to material business risk.

The Bombay High Court citation is significant for the same reason. Courts have heard environmental PILs for years. What made this different was that the petitioners could now cite the IMF on economic costs. Economic arguments carry weight in judicial proceedings in ways that appeals to public health often do not.

What Fixing This Would Actually Require

Diagnosis is easier than prescription. But the economic framing also clarifies what solutions would need to accomplish.

First, adopt economic framing systematically. Every discussion of pollution should lead with GDP costs, not death tolls. This is not because deaths matter less than money, but because money talks louder in the rooms where policy is made. The Finance Ministry's annual Economic Survey should include a dedicated section quantifying pollution costs. Budget documents should estimate the fiscal drag from pollution-related healthcare expenditure and productivity losses.

Second, invest in measurement infrastructure. India lacks comprehensive pollution monitoring that provides real-time, granular data across the country. The Central Pollution Control Board monitors 804 stations across the country. The United States, with one-quarter of India's population, has over 4,000 monitors in its EPA network. Without measurement, management is impossible. Every district should have continuous ambient air quality monitoring, and the data should be publicly accessible in real-time.

Third, align incentives with costs. If pollution imposes costs of 1-3% of GDP annually, then pollution control investments that cost less than that are economically justified. This means proper enforcement of existing regulations, not new laws. India has adequate environmental legislation. What it lacks is political will to enforce it. That enforcement requires funding pollution control boards adequately, protecting enforcement officers from political pressure, and creating meaningful penalties for violations.

Fourth, address the actual sources. The narrative that farmers burning stubble are the primary cause of Delhi's pollution is convenient but misleading. Year-round industrial emissions, vehicle exhaust, construction dust, and coal-fired power plants contribute far more to the annual pollution burden. Stubble burning creates episodic spikes, but the baseline is already toxic. A serious policy would address all sources, not just the politically convenient ones.

Fifth, create fiscal space for clean transitions. Many polluting activities exist because cleaner alternatives are more expensive. Power plants burn coal because natural gas costs more. Farmers burn stubble because mechanised alternatives require capital they do not have. Brick kilns use inefficient technologies because upgrading is unaffordable. If pollution costs 3% of GDP, spending 0.5% of GDP on clean energy subsidies, stubble management equipment, and industrial technology upgrades would be economically rational.

Sixth, protect the vulnerable during transition. Any serious pollution control policy will impose costs on some workers and communities. Coal miners, brick kiln workers, transport operators running old vehicles all face disruption. A just transition framework would provide income support, retraining, and alternative employment for those displaced by pollution control measures. Without this protection, pollution control becomes politically unsustainable.

The National Clean Air Programme (NCAP), launched in 2019, set a target of 20-30% reduction in PM2.5 and PM10 concentrations by 2024, later revised to 40% by 2026. Progress has been mixed. Some cities have shown improvement; others have worsened. The programme's budget has been consistently underfunded relative to the scale of the problem.

What would adequate funding look like? The National Clean Air Programme has been allocated approximately ₹3,072 crore ($370 million) since 2019, with an additional ₹16,539 crore ($2 billion) from the 15th Finance Commission for air quality improvements. These sums are orders of magnitude smaller than the economic costs they aim to address. If pollution costs $36-95 billion annually depending on which estimate you use, current spending represents less than 3% of annual losses.

The Politics of Breathing

Gita Gopinath spoke in Davos because she understands something Indian policymakers have been reluctant to acknowledge: pollution is not a health problem or an environmental problem. It is an economic emergency.

My son recovered from that respiratory infection. He has had three more since then, each November when the air quality index crosses 400 and we close windows, run air purifiers, and hope. We are privileged enough to afford nebulisers and paediatricians and air purifiers. Most Indians are not.

The ₹8,000 I spent on one episode becomes background noise in the economy, one of millions of transactions that never appear in any official accounting. But economists have learned to count these things. The numbers are large enough to matter. Whether they are large enough to compel action depends on whether we start treating pollution as what it is: an economic catastrophe that happens to be measured in shortened lives.

Varna is a development economist and writes at policygrounds.press.

Further Reading

1. World Bank: Catalyzing Clean Air in India - The source of the $36.8 billion estimate and methodology

2. OECD: The Economic Cost of Air Pollution - Methodology for GDP-pollution relationships

3. State of Global Air 2025 - Latest mortality data and country comparisons

4. Clean Air Fund: Economy and Air Pollution - Overview of economic impact studies and investment requirements