Exports are making the Indian manufacturing sector greener

India’s manufacturing sector is showing that going global can also mean going green. A recent study by IIM Lucknow reveals that companies engaged in exports are increasingly adopting energy-efficient technologies, boosting sustainability while enhancing competitiveness in international markets.

A recent study by the Indian Institute of Management (IIM) Lucknow reveals that Indian manufacturing firms engaged in exports have become significantly more energy-efficient, with improvements of up to 25%. This finding challenges the conventional belief that globalization leads to environmental degradation in developing countries.

Led by Professor Chandan Sharma, an expert in Economics and Business Environment at IIM Lucknow, the study analyzed two decades of firm-level data to assess the environmental impact of export activities. Utilizing the Propensity Score Matching-Difference-in-Differences (PSM-DID) methodology, the researchers compared firms that began exporting with those that did not, focusing on energy consumption patterns. The findings revealed that within a few years of entering global markets, exporting firms became notably more energy-efficient, primarily due to the adoption of advanced technologies.

Professor Sharma emphasized that these results highlight how trade can be a catalyst for sustainable and competitive manufacturing in India, aligning with the country’s climate goals under the Paris Agreement. The study’s publication in the esteemed Energy Economics journal underscores its significance in reshaping the discourse on globalization and environmental sustainability.

Implications for India’s manufacturing sector

The study’s implications are profound for India’s manufacturing sector, which has long grappled with the dual challenges of economic growth and environmental sustainability. By demonstrating that export activities can lead to greener practices, the research provides a compelling argument for policymakers to support export-oriented industries as a means to achieve both economic and environmental objectives.

Furthermore, the adoption of advanced technologies not only enhances energy efficiency but also positions Indian manufacturers as competitive players in the global market, where sustainability is increasingly becoming a key criterion for business success.

This study provides empirical evidence that exports can play a pivotal role in driving sustainability in Indian manufacturing. It underscores the potential of international trade to foster green growth, challenging the notion that globalization is inherently detrimental to the environment.

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FAQs

1. How much more energy-efficient do factories become when they start exporting?

Based on an IIM Lucknow study, exporting firms improve energy efficiency by up to ~25% within a few years.

2. What drives exporting companies in India to adopt greener / energy-saving technologies?

Motivations include international standards and regulations, competitiveness in overseas markets, access to foreign investment and technologies, and consumer demand for sustainable products. Also compliance with global climate norms.

3. Is the “exports make factories greener” effect seen across all manufacturing sectors in India, or only certain ones

While the study broadly covers the manufacturing sector, the impact may vary by sector depending on technology intensity, export exposure, and regulatory pressures. Sectors with higher export orientation tend to show more rapid improvements.

4. What role do government policies and trade agreements play in encouraging greener manufacturing in India?

Policy levers like Production Linked Incentive (PLI) schemes, trade agreements, sustainability standards for exports, certifications, and regulatory requirements are pushing firms to adopt better practices.

5. What are the challenges for non-exporting factories or MSMEs to become greener?

Common challenges include cost of adopting advanced tech, lack of access to finance, infrastructure deficits, knowledge and skill gaps, and meeting global compliance & standards.