Researchers at Indian Institute of Technology Madras suggest a “green domestic policy mapped with Foreign Direct Investment(FDI) and trade to increase productivity and energy efficiency for the manufacturing sector in India.
The findings of the study have come at a time when an increasing number of cap-and-trade emission trading systems are also being implemented around the globe- in California in the U.S. and China, the name select few, say researchers.
The NITI Aayog and the captains of industries have to take a call on the findings of the study to make some amendments and changes in the polices to imbed these into policies and priorities to address the problems.
The study has relevance for Himalayan states including Himachal Pradesh which are facing a brunt of pollution in rivers and streams and are reeling under climate change. These states are promoting industries in a big way in its industrial parks and corridors.
Researchers collaborated with International Researchers to find possible solutions to the productivity and pollution problems of manufacturing firms in India.
They studied the manufacturing sector of the Indian economy using data from the ‘Prowess IQ’ database of the Centre for Monitoring the Indian Economy from 2001 to 2015.
Based on the econometric analysis, this research suggests a green domestic policy mapped with FDI and trade to increase productivity and energy efficiency for the manufacturing sector in India.
Other Key Findings
The study further says that one-to-one correspondence and linkages between tax and energy intensity will promote renewable energy.
Firms that are improving energy efficiency can be either given tax credit or tax exemption as rewards. There is an urgent need to replace vintage capital and adopt new technology, it adds.
IIT Madras spokesperson say that pollution-intensive industries and firms are more likely to be attracted by lax environmental policy. Therefore, performance, achievement and trade’ policies need to focus on these firms.
The firms in pollution-intensive industries seem to prefer to relocate to pollution havens rather than innovate, assisting these firms maintain their business.
The researchers further conclude that the positive spillovers from export participation and foreign direct investments could help the Indian economy and increase energy efficiency in the manufacturing sector.
A sustainable energy policy targeting the manufacturing industry is essential for the Indian economy to contribute to green and sustainable development.
The findings of this study were published in the reputed, peer-reviewed journal Annals of Operations Research.
This research was led by Dr. Santosh Kumar Sahu, Assistant Professor of Economics, Department of Humanities and Social Sciences, IIT Madras, and included Mr. Prantik Bagchi, Research Scholar, Department of Humanities and Social Sciences, IIT Madras, Chennai.
The International research partners include Prof. Ajay Kumar from EMLYON Business School, Ecully, France, and Prof. Kim Hua Tan from Nottingham University Business School, U.K.
Dr Santosh Kumar Sahu said they focused on linking existing energy policies with productivity and energy intensity. This research can be used as the basis for redesigning future PAT schemes and energy policies for pollution-intensive firms to achieve energy efficiency.
“We are also now working on estimating carbon productivity for the firms in India's manufacturing sector to link innovation, R&D, energy efficiency and carbon productivity. These results will be beneficial for better energy and climate policy for India ”.
The researchers feel that more recent data, including information on the stages of research and development, patents, and environmental expenses at the firm level for manufacturing industries, would be highly beneficial to explain India’s energy consumption and emission structure.
An increase in energy efficiency for the firms in the manufacturing sector indicates technological advancement at the firm level. Price instruments and technology are instrumental in increasing energy efficiency, they say.
