Exports helping Indian factories become up to 25% greener

Exports are not just driving India’s manufacturing growth but also making factories significantly more energy-efficient, according to a new study by the Indian Institute of Management (IIM) Lucknow. The research, led by Prof. Chandan Sharma, from the institute’s Economics and Business Environment area, analyzed two decades of firm-level data and found that export participation can improve a company’s energy efficiency by as much as 25% within three years.

Published in the journal Energy Economics (Elsevier), the study is described as 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.

Contrary to the widespread belief that trade liberalization worsens environmental outcomes in developing economies, the study finds that integration with global markets can, in fact, accelerate green growth. Exporting firms, and even those operating in export-intensive clusters, show measurable gains in efficiency and reduced energy intensity.

The research attributes these improvements largely to technology diffusion—access to cleaner, more advanced foreign technologies that exporting firms gain through trade relationships.

The study urges policymakers to align trade and sustainability strategies, recommending steps such as easing access to foreign technologies, incentivising firms to upgrade to energy-efficient systems, and reinforcing environmental standards in export-oriented sectors.