CHENNAI: Indian Institute of Technology Madras 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 the country, an IIT Madras release on Friday said.
Other key findings include 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 credits or tax exemptions as rewards and there is an urgent need to replace vintage capital and adopt new technology.
The study also has important policy implications with regard to global climate change regulations as an increasing number of cap-and-trade emission trading systems are also being implemented around the globe (Ex: in California in the U.S. and China).
As pollution-intensive industries and firms are more likely to be attracted by lax environmental policy, ‘Performance, Achievement and Trade’ policies need to focus on these firms.
Additionally, as firms in pollution-intensive industries seem to prefer to relocate to pollution havens rather than innovate, assisting these firms in improving their energy efficiency and reducing their pollution can help them gain legitimacy and maintain their business.
The researchers further conclude that the positive spill overs 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.