A recent study by the Indian Institute of Management (IIM) Lucknow has found that exports are driving India’s manufacturing growth and making factories more energy-efficient. The research, led by Prof. Chandan Sharma, analyzed two decades of firm-level data and discovered that export participation can improve a company’s energy efficiency by up to 25% within three years. This study is the first empirical evidence linking export activity to greener manufacturing in India.
Using a Propensity Score Matching–Difference-in-Differences (PSM-DID) approach, the researchers identified how exposure to international markets drives firms to adopt advanced technologies and more sustainable production practices. The study found that exporting firms, and even those operating in export-intensive clusters, show significant gains in efficiency and reduced energy intensity.
The research attributes these improvements to technology diffusion, where exporting firms gain access to cleaner, more advanced foreign technologies through trade relationships. This challenges the widespread belief that trade liberalization worsens environmental outcomes in developing economies. Instead, the study suggests that integration with global markets can accelerate green growth.
The study’s findings have important implications for policymakers. The researchers recommend aligning trade and sustainability strategies by easing access to foreign technologies, incentivizing firms to upgrade to energy-efficient systems, and reinforcing environmental standards in export-oriented sectors. By doing so, policymakers can promote sustainable manufacturing practices and reduce energy intensity in the manufacturing sector.
Overall, the study provides new insights into the relationship between exports and environmental sustainability in India’s manufacturing sector. The findings suggest that exports can be a driving force for green growth, and policymakers can play a crucial role in promoting sustainable manufacturing practices by aligning trade and sustainability strategies. The study’s recommendations can help India achieve its sustainability goals while continuing to drive economic growth through exports.