This paper attempts to analyse the nature of relationship between the levels of Household Air Pollution (HAP) and incidence of morbidity in urban India along with the pattern of its regional variations. It also explores the causal connection between the incidence of air-related diseases and HAP, giving control for outdoor pollution. Whether these effects are sensitive to the overall level of economic development is an issue of our interest. Therefore, the States/UTs of India are grouped, in terms of different developmental parameters, using Multidimensional Scaling and Clustering technique, and the relation between HAP and morbidity has been analysed for each group of states by applying stepwise regression techniques. The study of this heterogeneity helped us provide more focused policy prescriptions. Different policy prescriptions in terms of education as well as exposure to HAP and fuel choices have been suggested for different clusters.