The green industrial policy India actually needs

The global shift away from fossil fuels is no longer driven solely by climate policy. It is being accelerated by war, energy insecurity, trade conflict, and the race to control the technologies that will power the next economy. For India, a large and fast-growing economy seeking to cut emissions while meeting rising energy demand, the transition must ensure that decarbonisation strengthens, rather than weakens, national resilience.

India is at a crucial phase. It can try to match the large-scale clean-technology subsidies deployed by China, the European Union (EU), and, until the current administration, the US. Or it can take a more strategic route by using limited public funds to build the foundations needed — reliable infrastructure, skilled workers, testing facilities, credible standards, and access to technology.

Subsidies, when deployed under the right conditions, work. India’s solar module and cell manufacturing scaled rapidly under the Production-Linked Incentive (PLI) and now competes at a global scale. But the same has not been true for batteries or electrolysers. The missing link is the ecosystem needed to support these sectors — resilient supply chains, a strong industrial ecosystems, skilling, quality assurance, and technology transfer. 

India must now build the ecosystem as seriously as it has built the incentive. 

Getting the sequencing right

India needs a strong green industrial policy to expand domestic manufacturing in electric vehicles (EVs), batteries, electrolysers, green hydrogen, solar components, and other low-carbon technologies. Subsidies have a role, but work best with a supportive ecosystem. The priority is sequencing: Getting the public inputs right so that financial incentives translate into sustainable capability.

Large economies with deep fiscal resources can afford to subsidise firms heavily, absorb failures, and adjust course over time. In India, every rupee spent on corporate incentives competes with essential public priorities like health, education, and basic infrastructure, making the efficient use of public capital important.

Addressing coordination failures

The most urgent task is to address coordination failures. In many green manufacturing sectors, investors hesitate to commit capital because the surrounding ecosystem is incomplete. EV components, electrolysers, and battery manufacturing all depend on specialised import-clearing desks, quality-control centres, reliable power connectivity, storage facilities, logistics networks, shared testing infrastructure, and workforce housing. No single firm can build all this alone, and private investors will not move quickly if they are unsure suppliers, customers, workers, and regulators will arrive at the same time.

This is where government action is most valuable. India should accelerate the creation of specialised green manufacturing parks, in partnership with the private sector. By clustering manufacturers and shared services, such parks can generate economies of scale, reduce transaction costs, and create common infrastructure. India’s Green Hydrogen Valley initiative points in this direction. China's success in green manufacturing has also been driven, in part, by industrial hubs that anchor supply chains and support scale. But those hubs were built on decades of prior public investment in skills and China’s “1+N” policy framework. 

India needs to build that foundation and not assume the parks alone will do the work.

Investing in skills

A second priority is skills. Green manufacturing depends on a workforce with specialised, high-tech capabilities. Yet firms are often reluctant to invest early in advanced training because workers can be poached by competitors, leading to underinvestment in skills, even when the economy badly needs it.

The government should work with industry leaders, start-ups, technical institutes, and certification bodies to co-design and upgrade training programmes for green technologies, focusing on precision engineering, electrochemistry, AI-enabled digital supply chains, advanced recycling, and waste management. Public investment in skills is not welfare spending, it is industrial infrastructure.

Building a quality-assurance ecosystem

The third pillar is quality. Often treated as a technical issue, it is central to competitiveness. If Indian-made green products fail to meet international environmental certifications and performance standards, they will struggle to enter high-value markets such as the EU, Australia, New Zealand, and Japan. Even within India, concerns about product reliability continue to make companies and banks cautious.

India, therefore, needs a trusted quality-assurance ecosystem with stronger lab networks, credible accreditation agencies, transparent certification standards, and internationally respected testing facilities. 

Using market access strategically

Finally, India should use market access more strategically. For emerging economies, matching the innovation subsidies of richer countries can be fiscally and commercially risky. India has another asset: One of the world’s largest domestic markets. Access to that market should be leveraged to secure technology transfer, though the high price and providers’ tendency to retain core intellectual property (IP) has meant market access alone has limited impact. Joint ventures with specific milestones matter more than stated preferences.

This requires policies that encourage joint ventures built around real know-how, partnerships to secure critical minerals, movement of specialised talent into India, and domestic component manufacturing. Over time, these can help Indian firms move up the value chain and build long-term cross-border co-innovation.

The lesson is simple. India can’t outspend richer economies. It must, instead, fix market failures, build the right ecosystem, and spend smarter. 

A shorter version of this article first appeared in the print edition of The New Indian Express (dated 25 July 2026).