In Short : Turbocharging green industrial growth involves accelerating the adoption of sustainable practices, renewable energy, and eco-friendly technologies in industrial sectors. This approach aims to boost economic development while minimizing environmental impact, promoting a balance between growth and sustainability.
In Detail : Industry is a critical pillar not only to place ourselves in supply chains but also to generate jobs and create a greener economy worth trillions.
India has a new government and is on the cusp of a potential multi-decadal growth trajectory. But as it prepares the Budget, harnessing most of this growth potential requires rethinking our industrial policies. India’s growth in this decade faces several global headwinds — current and potential armed conflicts in several geographies, increasing trade barriers and protectionism by developed regions such as the US and European Union (EU), a new world order mimicking the politics of the Cold War era, and to top it all, a global climate emergency which often gets undermined in international fora. In the five years of the new government, much will depend on how effectively it can navigate these challenges while ensuring jobs, growth, and sustainability at home.
There are many non-aligned options and choices to be made to leverage global headwinds for India’s green economic growth.
First, the government must consider a singular energy security and transition mandate for all related ministries. This concerns both energy-producing and -consuming industries and their value chains. Multiple energy transitions are simultaneously underway in India. Fossil fuel prices have been volatile in the post-pandemic period, and the Russia-Ukraine crisis is reshaping energy and core sector supply chains. To optimise its energy mix, India is expanding solar, wind, green hydrogen, and biofuels, while also increasing natural gas supply to 15% of the mix. Several ministries are overseeing these transitions — ministry of petroleum and natural gas, ministry of coal, ministry of power, ministry of chemicals and fertilisers, ministry of heavy industries, and ministry of new and renewable energy — with their own energy efficiency and fuel-specific mandates. This could lead to suboptimal energy transition pathways for the country as a whole.
While a singular ministry for energy with a clear vision of how to transition would be ideal, the new government could alternatively think of a high-powered interministerial group at the Prime Minister’s Office that determines the national energy mandate. The group could develop a clear road map for all ministries and highlight the role of different fuels and technologies.
Second, implementing internal mechanisms to guard against protectionist sustainability actions in international trade must be considered and evaluated. These non-trade measures (NTMs) include monetary penalties like the EU Carbon Border Adjustment Mechanism (CBAM), and entry barriers like the EU Deforestation Regulation. The Council on Energy, Environment and Water estimates that 32% of Indian exports to the EU (as of 2022) amounting to $27 billion are at risk from non-CBAM NTMs. This affects a wide range of sectors, including textiles, chemicals, select consumer electronics, and plastics. The government, primarily the ministry of commerce, has to set up a clear internal governance structure to identify and evaluate action on these ever-increasing NTMs. Further, a clear process is required to translate and transmit the NTM requirements to the right stakeholders, which are often small industries such as textile and ceramics. The government could consider mechanisms such as industry-specific desks, product tracking, and certification of origin to ensure domestic support for enterprises. At the same time, national standards and tracking of embedded carbon content in supply chains should be considered, and incentives should be provided to lower carbon content.
Third, micro, small and medium enterprise (MSME) data should be digitised. MSMEs are the backbone of India’s economy and key to industrial growth and low carbon transition. The government could create a digital MSME “stack” for ease of business, skilling, and export resilience. The government portal for MSMEs, Udyam, where over 45 million Indian enterprises are registered, includes nearly 775,000 small and medium-scale industrial units. Data collected under Udyam could be used for various purposes: developing credit ratings for enterprises, analysing energy data for efficiency metrics within similar industries, and screening employee data to develop skilling programmes. Increasingly, export markets require traceability of products along supply chains. Udyam could facilitate certification of origin and handling of products with linkages to the goods and services tax system. This could also help the Indian industry compete in international markets with sustainability barriers.
Fourth, R&D for green tech solutions should be prioritised on mission mode. So far, the R&D discussion in India has largely focussed on the amount spent as a percentage of GDP (at less than 1% as of 2020-21) and it must be increased. The efficiency of the spending and commercialisation of developed technologies is not discussed as much. Most innovations remain at the prototype stage and never progress to the commercial stages of production.
The National Research Foundation should be given the means to focus on defining clear objectives for clean energy research projects, which aim for commercial product development rather than just research papers. R&D projects need dedicated project management and a clear process to document success or failure at each stage. Substantial technological research has been undertaken in academic and national laboratories, such as the Indian Institute of Technology and the Council of Scientific and Industrial Research, but there is no way to locate specific ones for commercialisation. Therefore, a compendium of technologies with readiness levels should be compiled for easy access to the R&D community. Successes in Indian space research and military hardware development must be emulated to green the industrial sector.
India is an emerging global manufacturing and industrial hub. Industry is a critical pillar not only to place ourselves in supply chains but also to generate jobs and create a greener economy worth trillions. It must become a top priority for the new government from the get-go.
