Green Industrialization: An Urgent Need for India’s Future

EAC-PM Chairman S Mahendra Dev highlights green industrialization as key to energy security in a changing global landscape.

Gopi

•March 21, 2026•5 mins read

Green industrialisation: India’s strategic path to energy security and sustainable growth

Introduction

Global industrial policy interventions surged from 52 in 2012 to over 1,500 in 2022 — signalling a worldwide retreat from free-market orthodoxy toward state-led strategic industrial policy. Simultaneously, the West Asia conflict has exposed the fragility of fossil fuel supply chains, with crude oil and gas price volatility threatening the growth trajectories of import-dependent economies like India. Against this backdrop, green industrialisation has shifted from a climate aspiration to a strategic necessity — the intersection of energy security, economic resilience, and India's ambition for global leadership in a multipolar world order. India's GDP growth of 7.6% in 2025–26 provides the macroeconomic foundation for this transition.

Background & Context

The world is experiencing simultaneous shocks — geopolitical fragmentation, weakening of multilateral institutions (WTO), supply chain vulnerabilities post-COVID, and climate-driven energy disruptions. This has triggered a global industrial policy resurgence, with major economies (USA's IRA, EU's Green Deal, China's Made in China 2025) deploying massive state subsidies for green manufacturing.

India's response — Atmanirbhar Bharat — consciously pivots from the old import-substitution model to competitive export-oriented green manufacturing, positioning India as a global supply chain alternative while decarbonising domestically.

"The growth momentum is not merely cyclical; it reflects a deeper commitment to economic and environmental sustainability and to balancing fiscal prudence, inclusive development, and productivity-enhancing reforms." — S. Mahendra Dev, Chairman, EAC-PM

India's Climate Commitments — Panchamrit (COP26)

Commitment	Target
Renewable energy share	50% of total energy by 2030
GDP carbon intensity reduction	45% reduction from 2005 levels by 2030
Cumulative non-fossil electricity capacity	500 GW by 2030
Net-zero emissions	By 2070
Carbon sink creation	2.5–3 billion tonnes via forests by 2030

These commitments form the policy backbone of India's green industrialisation strategy — making them a high-frequency UPSC data set.

Five Pillars of Industrial Decarbonisation

India's approach to greening its most energy-intensive sectors — steel, cement, chemicals, and MSMEs — rests on five interlocking pillars:

1. Energy Efficiency — PAT Scheme The Perform, Achieve and Trade (PAT) scheme creates a market-linked mechanism where energy-intensive industries earn tradeable certificates for exceeding efficiency targets, incentivising continuous improvement without mandating specific technologies.

2. Electrification of Industrial Processes As renewable capacity scales up, replacing fossil-fuel-based industrial heat and processes with electricity — green electrification — becomes economically viable and ecologically necessary.

3. Alternative Fuels — Green Hydrogen The National Green Hydrogen Mission targets 5 million tonnes (MT) of green hydrogen annually by 2030, positioning India as a potential global green hydrogen exporter. Solar PV manufacturing is being scaled simultaneously to reduce input costs.

4. Circular Economy Measures

Steel Scrap Recycling Policy — reduces energy and ore intensity of steel production
Waste co-processing in cement kilns — substitutes fossil fuels with industrial waste, reducing emissions and landfill burden

5. Carbon Markets — Carbon Credit Trading Scheme (CCTS) India's Carbon Credit Trading Scheme prices emissions to create financial incentives for cleaner technology investment — a key step toward aligning India's industry with global carbon border adjustment mechanisms (EU CBAM).

Green Industrialisation & Inclusive Growth

A critical analytical distinction for UPSC: green industrialisation is not purely an environmental agenda — it is a jobs and equity agenda.

Dev distinguishes between:

Pro-poor growth — targeting the poorest directly
Inclusive development — structural shift toward labour-intensive green manufacturing that creates quality jobs across skill levels

On Jobs: While fossil fuel sectors will shed jobs, green sectors (renewable energy, EVs, green hydrogen, recycling) demand low-, semi-, and high-skilled workers simultaneously — offering net employment gains if accompanied by reskilling programmes, regional transition support, and safety nets. This is the just transition framework.

Sectors with green job potential in India: Solar panel manufacturing, EV and battery production, green hydrogen, sustainable construction, circular economy industries.

Federal Dimension — State-Level Green Hubs

Green industrialisation in India is not purely a central government project. State-level industrial policy plays a critical enabling role:

Maharashtra: Green hydrogen hub development; renewable integration in industrial clusters
Gujarat: Solar manufacturing; green port initiatives; renewable energy zones
Odisha: Green steel (leveraging existing steel belt); renewable-powered mining

"This cooperative federal approach is essential for scaling up green industrialisation across a diverse economy." — S. Mahendra Dev, EAC-PM

This cooperative federalism dimension is directly relevant to GS Paper II questions on Centre-State relations and industrial policy.

Global Context — Implications for the Global South

India's green industrialisation model carries demonstration value for developing economies facing the same dilemma: how to industrialise without replicating the carbon-intensive pathways of earlier industrialisers.

Key conditions for success — applicable to the Global South broadly:

Climate finance: Developed nations must honour $100 billion/year commitments (still unmet)
Technology transfer: Green technologies must be accessible without prohibitive IP barriers
Fair trade: Carbon border taxes (EU CBAM) must not penalise developing economy exporters unfairly

With India hosting the BRICS Summit in 2026, South-South cooperation on green industrialisation — technology sharing, green finance, joint manufacturing — could gain significant momentum.

Challenges

Finance gap: Green transition requires massive upfront capital; India's green bond market is nascent
Just transition risk: Coal-dependent regions (Jharkhand, Chhattisgarh, Odisha) face concentrated job losses without adequate safety nets
Technology dependence: Critical mineral supply chains (lithium, cobalt) for batteries remain import-dependent
WTO compatibility: Industrial subsidies under Atmanirbhar Bharat may face trade law challenges
MSME capacity: Small enterprises lack capital and technical capacity for energy efficiency upgrades

Conclusion

India's green industrialisation agenda represents a rare convergence of climate responsibility, strategic autonomy, and economic opportunity. The West Asia conflict has sharpened this logic — dependence on fossil fuel imports is not merely an environmental liability but a national security vulnerability. The Panchamrit commitments, PAT scheme, National Green Hydrogen Mission, and Carbon Credit Trading Scheme together constitute a credible policy architecture. The real test, however, lies in execution: ensuring that the green transition is just (protecting workers in fossil fuel sectors), inclusive (generating quality jobs across skill levels), and federated (harnessing state-level dynamism). India's ability to prove that development and decarbonisation reinforce rather than contradict each other will be its most consequential contribution to the global climate conversation.

Quick Q&A

Everything you need to know

Green industrialisation refers to the transformation of industrial systems to ensure economic growth while minimizing environmental degradation through the adoption of clean energy, sustainable technologies, and efficient resource use. It involves decarbonising key sectors such as steel, cement, and chemicals while promoting renewable energy and circular economy practices.

In the current global context, it has become a strategic necessity for India due to multiple factors. The West Asia conflict has exposed vulnerabilities in global fuel markets, leading to volatility in oil and gas prices. This highlights India's dependence on imported fossil fuels and underscores the importance of energy security for sustained economic growth.

Additionally, structural global changes such as:

The emergence of a multipolar world order
Geopolitical fragmentation and trade disruptions
Weakening multilateral institutions like the WTO

have compelled India to adopt a more self-reliant and resilient industrial strategy.

Thus, green industrialisation is not merely an environmental agenda but a comprehensive economic strategy that integrates sustainability, energy security, and global competitiveness, positioning India for long-term leadership.

Energy security refers to the uninterrupted availability of energy sources at an affordable price. For a fast-growing economy like India, it is a critical determinant of industrial output, inflation, and overall macroeconomic stability.

Recent geopolitical developments, particularly the West Asia conflict, have disrupted global supply chains and caused sharp increases in crude oil and gas prices. Since India imports a significant portion of its energy needs, such disruptions directly impact its fiscal balance and economic growth. This makes energy security a strategic priority rather than a mere policy concern.

Its importance can be understood through:

Economic stability: Stable energy prices prevent inflationary pressures.
Industrial growth: Energy-intensive sectors like steel and cement rely heavily on consistent supply.
National security: Reduced dependence on volatile regions enhances strategic autonomy.

India’s push towards renewables, green hydrogen, and electrification aligns with its Panchamrit commitments and reduces vulnerability to external shocks. Thus, energy security is deeply intertwined with sustainable development and long-term resilience.

India’s industrial decarbonisation strategy is structured around five key pillars, each addressing a specific dimension of emissions reduction while ensuring industrial productivity.

First, energy efficiency: Initiatives like the Perform, Achieve and Trade (PAT) scheme create market-based incentives for industries to reduce energy consumption. This improves competitiveness while lowering emissions.

Second, electrification of processes: As renewable energy capacity expands, industries are encouraged to shift from fossil fuels to electricity-based operations, reducing carbon intensity.

Third, alternative fuels: The National Green Hydrogen Mission aims to produce 5 million tonnes annually by 2030, offering a clean substitute for fossil fuels in hard-to-abate sectors like steel and fertilizers.

Fourth, circular economy practices:

Steel scrap recycling reduces the need for virgin raw materials
Waste co-processing in cement kilns enhances resource efficiency

Fifth, carbon management: The Carbon Credit Trading Scheme introduces pricing mechanisms that incentivize industries to adopt cleaner technologies.

Together, these pillars create a holistic framework that balances environmental sustainability with industrial growth, ensuring a smooth transition to a low-carbon economy.

The relationship between green industrialisation and inclusive growth is both complementary and complex. On one hand, green industrialisation promotes sustainable development and long-term economic resilience; on the other, it poses transitional challenges, particularly for vulnerable workers.

Positive linkages include:

Job creation: Renewable energy, green hydrogen, and energy-efficient industries generate employment across skill levels.
Regional development: States like Gujarat and Odisha are emerging as green industrial hubs.
Health benefits: Reduced pollution improves public health, especially for poorer communities.

However, challenges remain:

Job displacement: Workers in fossil fuel industries may face unemployment.
Skill gaps: Green sectors require new technical skills.
Regional disparities: Not all states have equal capacity to transition.

To address these issues, India emphasizes a ‘just transition’ framework involving reskilling programs, social safety nets, and targeted regional policies.

Thus, while green industrialisation has the potential to drive broad-based inclusive growth, its success depends on proactive policy interventions that ensure no section of society is left behind.

State governments play a crucial role in operationalising India’s green industrialisation strategy through localized policies and implementation mechanisms. Their initiatives demonstrate the importance of cooperative federalism in achieving national sustainability goals.

Key examples include:

Gujarat: अग्रणी in renewable energy and green hydrogen projects, supported by strong industrial infrastructure and policy incentives.
Maharashtra: Focuses on integrating clean energy into manufacturing clusters and promoting electric mobility.
Odisha: Leveraging its mineral base to develop green steel production using hydrogen-based technologies.

These states are aligning industrial policies with renewable energy expansion, creating green industrial hubs that attract investment and innovation.

Impact of such initiatives:

Enhances regional competitiveness
Encourages private sector participation
Facilitates faster adoption of clean technologies

Thus, state-level dynamism complements national policies, ensuring that green industrialisation is not just a top-down approach but a decentralised and inclusive process.

India’s shift from import substitution to export-oriented green manufacturing reflects changing global economic realities and domestic priorities. Earlier policies focused on protecting domestic industries, but the current approach emphasizes global competitiveness and integration into value chains.

Key reasons include:

Global industrial policy resurgence: Interventions increased from 52 in 2012 to 1,500 in 2022, indicating a shift towards strategic industries.
Supply chain diversification: Firms are seeking alternatives to concentrated production hubs, creating opportunities for India.
Rising demand for green products: International markets increasingly prefer low-carbon goods.

Domestic factors also play a role:

Strong macroeconomic fundamentals: GDP growth of 7.6% supports industrial expansion.
Policy frameworks: Initiatives like Atmanirbhar Bharat focus on competitiveness rather than protectionism.

This shift enables India to position itself as a global manufacturing hub while aligning with climate goals.

Thus, export-oriented green manufacturing represents a strategic convergence of economic growth, sustainability, and global integration, enhancing India’s role in the evolving world economy.

India’s green industrialisation model offers valuable lessons for the Global South, where countries face the dual challenge of economic development and environmental sustainability.

Key features of the model include:

Tech leapfrogging: India is bypassing polluting technologies and directly adopting cleaner alternatives.
Policy innovation: Schemes like PAT, carbon markets, and green hydrogen missions provide scalable solutions.
Inclusive focus: Emphasis on job creation, reskilling, and equitable growth ensures social acceptance.

For example, India’s Panchamrit commitments set clear targets for renewable energy and emissions reduction while maintaining economic growth. This demonstrates that development and decarbonisation can be mutually reinforcing.

However, replicability depends on:

Access to climate finance
Technology transfer from developed nations
Fair and equitable global trade systems

India’s leadership in platforms like BRICS further strengthens South-South cooperation.

Thus, India’s approach provides a pragmatic and adaptable framework for other developing countries, though its success hinges on supportive global conditions and collaborative international efforts.