India’s economic growth and sustainability challenges
Abstract: India has achieved high levels of economic growth year after year. Despite that, the country continues to struggle with sustainability challenges. This case presents India’s environmental and social sustainability challenges in its various industries and questions how India can tackle them. Answering this question will help India to achieve its vision of becoming a self-reliant and sustainable economy.
Keywords: India, economic growth, environmental sustainability, social sustainability
Authors:
Ishtiak Ahmed, corresponding author, International Business Management student, Jamk University of Applied Sciences, School of Business, Rajakatu 35, 40200, Jyväskylä, Finland, ahmedishtiak293 (at) gmail.com
Murat Akpinar, Jamk University of Applied Sciences, School of Business, Rajakatu 35, 40200, Jyväskylä, Finland
When India’s Prime Minister Narendra Modi was attending a global summit on climate change, representing a nation of 1.4 billion people, his words echoed the aspirations of the people of his country. He said, “India is the land of Mahatma Gandhi, whose vision for sustainable development inspires us greatly”, emphasizing the nation’s commitment to achieving a green future [1]. However, the Prime Minister knew the journey ahead would not be without obstacles. Sustainability in India covers environmental and social concerns, such as pollution, environmental degradation, fair labor practices, gender equality, education, healthcare, and inclusive economic development. Balancing economic growth with sustainability in a rapidly industrializing nation would not be an easy task. As India is moving towards becoming a leading economic power, will it be able to address its sustainability challenges?
India’s industrial development
India is the seventh largest in terms of land area and the most populous country in the world, with 1.4 billion people in 2024. It is in South Asia and shares its borders with China, Pakistan, Nepal, Bhutan, and Bangladesh (see Exhibit 1). The capital is New Delhi. Located at the intersection of significant trade routes that connect the Middle East, East Asia, and Southeast Asia, India has been a central hub for commerce, culture, and international relations in history [2]. With a gross domestic product (GDP) of 4.2 billion USD, it is the world’s fourth-largest economy, behind the USA, China, and Germany, in 2025 [3]. It is also a crucial force in Asia, counterbalancing the increasing influence of China [4], and a member of global organizations like BRICS, G20, and Quad [5].
After gaining independence in 1947, India’s economic policy aimed to achieve self-sufficiency. Until 1960, agriculture accounted for more than half of India’s GDP [6]. The introduction of high-yielding variety seeds, the appropriate application of fertilizers, and the improvement of irrigation methods paved the way for India to be self-sufficient in agriculture. India also prioritized the establishment of heavy industries, such as steel and power generation, through government-led initiatives. Bhilai Steel Plant was set up jointly with the Soviet Union in 1955, along with Tata Iron and Steel Company [7]. These initiatives played key roles in India’s initial industrialization.
In response to a critical balance-of-payments crisis in 1991 [8], India implemented a series of reforms that included deregulation, privatization, and reductions in import tariffs [9]. This led to an influx of foreign direct investments in industries like telecommunications, automotive manufacturing, and consumer goods. Consequently, the GDP growth rate, which had been around 3.5% before the reforms, surged to over 6% during the 1990s [10].
The rise of the Indian Information Technology (IT) industry became a game-changer for the country in the late 1990s and early 2000s. Cities like Bengaluru, Hyderabad, and Pune grew into major IT hubs and hosted multinational companies like Infosys, Wipro, and Tata Consulting Services. The industry continued to grow during the 2010s and 2020s (see Exhibit 2), ensuring India’s strategic position as a global leader in software services with an employment of 5.8 million people in 2025 [11].
India’s pharmaceutical industry has experienced remarkable growth, leading to its recognition as the “Pharmacy of the World”. In 2023, exports surged to 25 billion USD [12], fueled by the worldwide demand for cost-effective healthcare options [13]. Sun Pharma and Dr. Reddy’s Laboratories are India’s significant exporters of generic medications.
The “Make in India” initiative, launched in 2014, boosted manufacturing output. In 2023, India was a leading automotive manufacturing location following China, the United States, and Japan (see Exhibit 3). The automotive industry made up about 7% of India’s GDP [14]. India is the world’s second-largest producer of mobile phones, with mobile phone exports of 20.4 billion USD in 2024 [15]. India’s renewable energy industry has been growing, with the intention of reducing the nation’s dependence on fossil fuels. In 2024, India added approximately 24.5 GW of solar capacity and 3.4 GW of wind capacity [16]. As of December 2024, the country’s total renewable energy installed capacity reached 209.4 GW [17].
India’s real GDP has continued to grow fast during the last years (see Exhibit 4). However, the country’s GDP per capita, which was approximately 2,970 USD in 2024, is far below the levels in industrialized countries. In addition, income inequality and regional development imbalances threaten India’s sustainable economic growth [18].
Environmental sustainability challenges in India’s key industries
India performs poorly on environmental quality, ranked 167th out of 170 countries in this dimension of the social progress index (see Exhibit 5). Large cities, like New Delhi, suffer from high levels of air pollution, especially during the winter months. India generates 62 metric tons of waste annually, including 7.9 metric tons of hazardous waste, 5.6 metric tons of plastic waste, 1.5 metric tons of e-waste, and 0.2 metric tons of biomedical waste [19]. The Extended Producer Responsibility rules for plastic waste have been weakly enforced, resulting in non-compliance among small and medium-sized enterprises [20]. There are opportunities for every industry to improve the situation.
The steel industry in India, the second largest crude steel manufacturer worldwide, faces sustainability challenges due to its coal dependency (accounting for 55% of the energy mix), high carbon emissions, and high level of water usage. As a result, air pollution from coal-powered plants and water scarcity in mining regions like Odisha remain at critical levels [21,22]. To reverse the trend, the government’s Production Linked Incentive aims to increase green steel production, while stricter emissions norms penalize noncompliance with the National Clean Air Programme [23,24]. Capital costs for hydrogen technology adoption and carbon capture systems are high, but green financing options, such as sustainability bonds, are also emerging [25]. The use of recyclable steel is increasing in new construction projects in urban areas, while it has yet to expand to rural areas. Adopting energy-efficient furnaces and circular economy models (e.g., slag recycling) remains slow, too [26]. Moreover, compliance with Extended Producer Responsibility rules for waste management is uneven, with small players like secondary steel producers and mini steel plants lagging [27].
India’s solar capacity exceeded 100 GW in January 2025, thanks to incentives for solar parks under the National Solar Mission, such as low solar tariffs and green bonds [28]. Energy distribution companies must source 40% of their energy from renewable sources by 2030 [29]. Growth, however, is hampered by high grid integration costs and delays in land acquisition [30].
The agriculture industry accounted for 16% of India’s GDP in 2023 [31]. This industry is highly vulnerable to the consequences of climate change, such as drought and erratic monsoon showers. Groundwater depletion emerges as a major issue, with the projection that 21 cities could hit the “zero water” mark by 2030 [32]. Soil degradation is another key issue. There are attempts to slow down the trend, like subsidized drip irrigation, the Ujjwala Yojana Initiative to reduce the use of biomass fuel, the Pesticides Management Bill to regulate the use of pesticides, and the adoption of artificial intelligence-based precision agriculture [33,34]. However, implementation remains a challenge, especially for small farmers [35].
Tower emissions of the telecom industry constitute 3% of India’s carbon footprint, while mining for rare earth minerals is an additional concern [36]. To address the latter, the telecom industry needs to achieve 70% recycling of e-waste by 2025, as set by the 2023 E-Waste Rules [37]. This is a challenging target since high costs for lithium-ion batteries and 5G infrastructure strain the budgets of telecom companies [38].
Adoption of electric vehicles in India is receiving government support in the form of Faster Adoption and Manufacturing of Electric Vehicles Phase II (FAME-II) subsidies and Goods and Services Tax concessions on Electric Vehicle purchases [39]. Demand for electric vehicles grows in cities, but there are still issues of affordability in rural areas. The high cost of lithium imports and the lack of adequate charging infrastructure further slow growth [40]. While research and development on sodium-ion batteries and hydrogen fuel cells continue, dependence on technology from China is a shortcoming [41].
The fast-moving consumer goods industry is under pressure to reduce plastic usage, as required by the 2024 Plastic Waste Management Amendment, and to increase the recycled content of plastic packaging by 50% by 2027 [42]. Sustainable packaging is expected to raise costs by approximately 15 to 20%, but eco-friendly consumers are willing to pay extra for eco-friendly products [43]. A good practice is the use of compostable packaging and blockchain traceability under the “Sunfeast Mom’s Magic” program by ITC Limited (formerly India Tobacco Company Limited) [44].
Data centers make up nearly 3% of the national electricity consumption in India. While the Green Data Centre Policy incentivizes the use of renewable energy sources in data centers [45], solar-powered campuses, like Infosys’s 50 MW solar power plant, help reduce emissions [46]. E-waste is a key concern for India’s IT industry [47]. Corporate commitments by Tata Consultancy Services, Wipro, and Hindustan Computers Limited aim to diminish e-waste [48]. Nevertheless, audits for compliance with domestic e-waste laws could be stricter [49].
India’s pharmaceutical industry has been subject to scrutiny for its input, residues of drugs, and its impact on water systems. The Clean Ganga Mission finances projects about effluent treatment plants, but small firms have challenges in affording such projects [50]. The “Revised Schedule M” makes it mandatory to follow effluent monitoring after June 2024, but this has been delayed [51]. The pollution of antibiotics remains an underreported issue despite campaigns by non-governmental organizations [52]. The Patancheru basin of Hyderabad contains antibiotic concentrations 1,000 times above the safe limits that could endanger aquatic organisms [53]. Enzyme-based synthesis and solar-powered manufacturing are somewhat greener options, but their implementations remain slow [54].
Prime Minister Narendra Modi’s idea of “LiFE” (Lifestyle for Environment) stresses the need for common action that balances industrial aspiration against planetary boundaries. With India targeting net-zero by 2070, the equitable distribution of climate policies will be vital to ensure that no community is left behind in the green transition [55,56].
Social sustainability challenges in India’s key industries
Small and medium-sized enterprises in India face challenges of labor safety and working conditions. This is most evident in the steel industry, which employs 2.5 million people [57]. The industry has had a high number of accidents and cases of silicosis, with rising concerns over health issues due to exposure to toxic emissions [58]. Corporate social responsibility programs initiated by big corporations, such as Tata Steel, address education and healthcare, and government initiatives, like “Skill India in India”, encourage skill growth, but informal workers and contract workers still suffer from pay inequalities and a lack of workplace safety [59].
The renewable energy industry has created jobs for over one million people, but large solar and wind farms displace rural people. Concerningly, worker safety is still a major issue, resulting in over 400 deaths in manufacturing, mining, and energy sectors in 2024 [60].
Over 50% of India’s workforce is engaged in agriculture. Small farms face financial insecurity due to fluctuating crop prices and climate change [61,62]. The minimum wage for agricultural workers remains below living wage levels, exacerbating rural poverty [63]. Women contribute over 40% of farm labor, but own only 13% of land, limiting their financial independence [64].
Digital inclusion is yet to be achieved between rural and urban areas. As of September 2023, urban areas boasted an internet penetration rate of 110%, whereas rural regions lagged at 42% [65]. Digital literacy levels are low, especially among women and the elderly [66]. There is also a need to address the safety of workers in the e-waste recycling sector, where more than 90% of electronic waste is processed informally without the use of appropriate safety gear [67]. Although the E-Waste Rules of 2023 mandate formal recycling, enforcement is poor [68].
The automotive industry employs more than 37 million people. Improvements in the working conditions of automotive workers have been made possible because of automation and safety protocols. However, these benefits have not been extended to contract workers [69,60]. The participation of women in the workforce is around 10% [71]. Labor rights violations in auto part manufacturing units persist, especially in Tamil Nadu and Maharashtra [72].
Sustainable employment practices have been promoted by Unilever and ITC Limited [73]. However, long working hours in packaging and supply chains, unsafe working conditions, and child labor are serious issues for the fast-moving consumer goods industry, which is the 4th largest employment generator in India [74,75].
The IT industry is leading the way in flexible work policies and diversity hiring [76]. However, women hold only a small portion of senior leadership positions, and the industry struggles with high burnout rates and stress [77,78].
Though a global leader in generic drug supplies, India’s pharmaceutical industry has received criticisms of poor labor conditions. Unruly waste management practices pose antibiotic resistance concerns and health hazards in the local communities [79]. Like in other industries, contract workers suffer from low pay and dangerous working conditions [80].
“Beti bachao beti padhao”, meaning “save the daughter, educate the daughter”, is a social campaign of the Indian government launched in 2015. The campaign aims to raise awareness against gender bias and contribute to inclusive economic development. Similarly, Prime Minister Narendra Modi’s slogans “sabka saath, sabka vikas”, meaning “together with all, development for all”, and “Atmanirbhar Bharat”, meaning “self-reliant and sustainable India”, envision inclusive growth and welfare for all citizens. Gaps remain, however, in the enforcement of this vision. There is a lot of room for advancing the country’s social progress (see Exhibit 5).
Open questions ahead
India confronts multiple sustainability challenges that could jeopardize its economic progress. The urban/rural divide, gender inequality, poor working conditions, informal labor, high levels of pollution, and environmental degradation are some of the challenges that necessitate urgent measures. What should be done to address these interlocking challenges? Who should act, and in what ways?
Exhibits
Exhibit 1. Map of Asia
Exhibit 2. Market size of India’s IT industry
Exhibit 3. Motor vehicle production volume in 2023, by country
Exhibit 4. Real GDP growth rate of India from 2019 to 2024
Exhibit 5. India’s performance on the dimensions of the social progress index
Endnotes
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[33] Ibid.
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[41] Ibid.
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[45] Ibid.
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[50] Ibid.
[51] Ibid.
[52] Ibid.
[53] Ibid.
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