This paper provides a causal estimate of the contemporaneous impact of outdoor air pollution on cognitive and academic performance of children aged 8-11 years in India by combining satellite PM2.5 data with the two rounds of Indian Human Development Survey. We apply instrumental variable strategy for identification as local pollution levels may be endogenous due to local household behavioural choices. Our identification strategy relies on the use of thermal inversions to identify the effect of air pollution on the academic performance of children. Results show that exposure to average PM2.5 concentrations in the past 12 months prior to the month of test taken by the children has a significant detrimental impact on their cognitive ability in India. Specifically, a 1 𝜇g/m3 increase in average PM2.5 concentrations in the past 12 months decreases the math performance by 10-16 percentage points, reading performance by 7-9 percentage points and increases the probability of repeating a grade in school by 5 percentage points. We also find that there is a fall in the combined age-standardised cognitive score. The results imply that the cost of air pollution in India is much higher than estimated, and a narrow focus on traditional health outcomes understate the magnitude of negative impact of pollution, as mental acuity is essential for higher productivity of children.