Understanding the Importance of Trade Integration for India’s Green Transition: An Analysis of Trade in Green Goods

India envisions becoming a Viksit Bharat (Developed India) by 2047, while simultaneously committing to its Net Zero Emission target by 2070. Trade integration will play a critical role in this journey. The economic reforms initiated in 1991, which liberalised India’s trade and investment policies, led to a surge in exports and foreign direct investment, reflected in the high GDP growth rates that peaked during 2005–2007. However, in recent years, this momentum has stalled. India’s share in global merchandise exports has largely remained stagnant, hovering around 2 %, largely due to high tariffs and non-tariff barriers imposed on its trading partners.

With India’s plan to transition towards a greener economy, it is time once again to revamp trade and investment policies, especially for green goods and technologies that can enable this transition.

With India’s plan to transition towards a greener economy, it is time once again to revamp trade and investment policies, especially for green goods and technologies that can enable this transition. In this context, integrating into Global Value Chains (GVCs) for green goods presents a strategic opportunity, as India moves towards its net zero targets.

Key trends in India’s trade in green goods

Green goods—such as solar panels, wind turbines, water purification systems, and energy-efficient appliances—are critical for advancing a low-carbon economy and improving access to green technologies. Examining India’s current position in the global green goods market, its comparative advantages, and its tariff policies provides a good starting point to assess the country’s readiness to emerge as a global leader in this vital space. This blog attempts to do so by analysing India’s trade in Green Goods (GGs)[1].

The scope of green goods considered here is not limited to final green products alone but also includes intermediate goods and essential inputs which are not necessarily green. For instance, solar energy technologies include key components such as solar PV modules and PV cells, and upstream materials like silicon wafers and polysilicon, which form the backbone of solar panel manufacturing. Similarly, wind energy systems rely on components such as rotors, generators and towers, which are not green but support green manufacturing.

Figure 1 presents India’s exports and imports of GGs as a share of its total exports and imports over the past decade. In 2024, GGs accounted for 4.5% of India’s total exports growing at a compound annual growth rate (CAGR) of 9% over the past decade, more than double the 4.4% CAGR of non-GG exports. On the import side, GGs constituted 5% of total imports in 2024, with a decade-long CAGR of 7.8%, compared to 5.8% for other goods. While the volume of GG imports has consistently exceeded exports (Figure 2) over the decade, the higher growth rate of GG exports signals a promising trend. In 2024, India imported 42% of the total GG goods from China, followed by the United States (6%) and Germany (5%).

Figure 1: Share of Green Goods in India’s Total Exports and Imports (in per cent)

Source: World Integrated Trade Solutions (WITS)

Figure 2: Trade Volume of Green Goods (GGs) in India, 2015–2024 (in USD Billion)

Source: World Integrated Trade Solutions (WITS)

Distribution of green goods trade across the supply chain stages

In terms of various supply chain stages, India’s exports and imports of green goods are analysed for four product categories – raw materials, intermediate goods, capital goods, and consumer goods, in line with the World Integrated Trade Solution (WITS) classification [2].

India exhibits relative export strength in Intermediate goods, being a net exporter in nearly half (45%) of them (22 out of 49). However, it remains significantly import-dependent in other categories, particularly raw materials and capital goods category wherein India is a net importer in around 76% and 68% of products respectively (Figure 3).  This suggests that while India is building capacity in Intermediate goods, it still relies heavily on imports of key capital-intensive green technologies which are important for supply chain integration, and high value addition.

Figure 3: Distribution of India’s Net Green Trade Position by Product Type, in 2024

Source: World Integrated Trade Solutions (WITS)

India’s share in global green goods exports and imports

While India’s share in global exports of green goods increased between 2017 and 2024, it is still less than 1%.

While India’s share in global exports of green goods increased between 2017 and 2024, it is still less than 1%.  On the import side, India’s share in global imports stood at around 2.5% in 2024, and it rose at a higher rate as compared to exports, highlighting rising domestic demand for environmentally friendly technologies and products. A large share of green goods (107 out of 182) in which India is a net importer suggests that the country is actively building domestic capacity in these sectors. In this context, being a net importer need not be seen as a weakness. Rather, imports of green technologies and intermediate goods can play a constructive role in the early stages of capacity development, enabling technology transfer, and the creation of backward linkages that support domestic industry growth.

Figure 4: India’s Share of Global Trade in Green Goods (2017-2024) (in per cent)

Source: World Integrated Trade Solutions (WITS)

To corroborate the findings on India’s share in global GG exports, a Revealed Comparative Advantage (RCA) analysis was conducted. The RCA index measures a country’s relative advantage or disadvantage in exporting a particular product, compared to the world average. An RCA value above 1 indicates comparative advantage, while a value below 1 suggests disadvantage[3]. Revealed comparative advantage assessment reveals that India lacks a comparative advantage in 71% of traded green goods. This gap narrows when compared to specific countries—India trails China in 54% of GGs, Germany in 44%, South Korea in 42%, and Vietnam in 34%.

India’s tariff policies for green goods

The above assessment of India’s global standing in green goods reveals that the country still has a long way to go in this space and needs supportive policies to effectively integrate into green global value chains (GVCs). In this regard, lowering tariffs emerges as a fundamental policy decision to enhance India’s competitiveness and facilitate greater participation in green GVCs.

The tariff on GGs rose from 8.04% in 2012 to 11.41% in 2023, paralleling the increase in tariffs on all goods (from 13.30% to 14.82%). This protectionist approach may shield the domestic industry in the short term, but it risks inflating costs for downstream users and delaying the adoption of clean technologies.

While global trends reflect a steady decline in overall tariffs[4] to promote freer trade, India’s average tariff levels have been rising (Figure 5 and 6), raising the cost of final products where domestic production remains limited.

The tariff on GGs rose from 8.04% in 2012 to 11.41% in 2023, paralleling the increase in tariffs on all goods (from 13.30% to 14.82%). This protectionist approach may shield the domestic industry in the short term, but it risks inflating costs for downstream users and delaying the adoption of clean technologies. A more liberal tariff policy on GGs could play a critical role in fostering a competitive, affordable, and sustainable green economy in India.

Figure 5: Average effectively applied tariff on Green Goods: Global vs. India (2014–2023) (in %)

Source: World Integrated Trade Solutions (WITS)

As the international trade ecosystem evolves with rising demand for greener goods, it is important that India positions itself as an active player in this new trade paradigm. India must align its trade policy with its climate goals and adopt a proactive, strategic approach to green integration.

1. The government should create and officially recognise an internal list of green goods mapped to relevant HS codes.

1. Develop an official green goods list: The government should create and officially recognise an internal list of green goods mapped to relevant HS codes. This list should be derived through extensive industry stakeholder consultations to ensure practical identification of products critical for India’s green transition.
2. Reduce tariffs on essential Green Goods (GGs): Tariffs on green goods that India heavily imports—such as components for solar panels, water treatment systems, and other clean technologies—should be progressively reduced to lower costs and accelerate domestic adoption. Free trade agreements (FTAs) offer an ideal platform to negotiate lower import duties on these key green inputs.
3. Create a conducive investment ecosystem: India should establish a supportive environment to strategically attract foreign direct investment (FDI) in green technology, renewable energy, and clean manufacturing. This requires continued improvements in the ease of doing business.
4. Boost private sector R&D in green manufacturing: Indian private enterprises need to significantly ramp up their investments in research and development focused on green technologies, processes, and products to build long-term competitiveness.
5. Strengthen MSME participation in green goods: Targeted support—through financing, training, technology access, and capacity building—must be provided to micro, small, and medium enterprises (MSMEs) in the green goods space to ensure their effective participation and foster inclusive green growth.