Pollution, not tariffs, is India's biggest economic risk: Gita Gopinath
What's the story
Gita Gopinath, a Harvard University professor and former chief economist of the International Monetary Fund (IMF), has warned that pollution is costing India more than any tariffs imposed on it. Speaking at the World Economic Forum in Davos, she stressed that the economic impact of pollution is much more severe than trade barriers.
Economic burden
Pollution's impact on productivity and public finances
Gopinath highlighted that pollution and its health effects place a bigger burden on productivity and public finances than trade barriers. She said, "One of the areas I wanted to point out, which we usually don't talk about when we are talking about business development is pollution." Poor air quality leads to higher healthcare costs, lost labor hours, and reduced workforce efficiency.
Policy focus
Environmental factors should be prioritized by policymakers
Gopinath said environmental factors deserve more attention from policymakers as they have long-lasting and far-reaching economic impacts. She added that addressing pollution could yield significant economic benefits along with public health gains. Despite India's progress in growing its economy and building infrastructure, pollution remains a major problem, especially in large cities.
Risk assessment
Environmental risks and macroeconomic stability
Gopinath's comments come amid a growing consensus among global economic institutions that environmental risks are increasingly important for macroeconomic stability, especially in fast-growing emerging economies like India. She stressed that addressing this issue on a war footing is critical and must be a top mission for India.
Growth trajectory
India on track to become 3rd largest economy
Despite the pollution concerns, Gopinath said India is on track to become the world's third-largest economy in a few years, most likely by 2028. She said revised GDP calculations could even hasten that timeline. However, she stressed that India's real challenge is not in headline economic rankings but in raising per capita incomes and sustaining reform momentum for long-term development goals.
Economic hurdles
Structural constraints and labor market challenges
Gopinath also highlighted persistent structural constraints such as land acquisition issues, weak land titling systems, and slow judicial processes that continue to weigh on manufacturing and investment. She said only about 30% of India's growth since the 1980s has come from labor due to a capital-intensive production structure shaped by regulatory rigidities.