NEW DELHI — As India’s merchandise exports contracted for the third straight month in June 2026, a quiet but rapid expansion in climate technology shipments is emerging as a potential lifeline for the country’s struggling trade balance. While textiles, engineering goods, and other traditional exports face margin pressures and global demand headwinds, solar modules, battery components, and green hydrogen equipment are defying the downturn—growing at double-digit rates and now accounting for nearly 11% of non-petroleum, non-gems-and-jewellery exports.
The shift suggests that India’s climate tech sector, long viewed as a niche or aspirational industry, may already hold the key to reversing the export slump without requiring sweeping policy overhauls or massive infrastructure investments. Customs data and corporate disclosures analyzed by The Core reveal that climate tech exports surged 32% in the fiscal year ending March 2026, reaching $12.7 billion. The growth starkly contrasts with the overall export decline of 3.5% during the same period, highlighting the sector’s resilience amid broader economic uncertainty.
What Happened: A Sector Defying the Downturn
India’s merchandise exports fell 4.8% year-on-year in June 2026 to $34.2 billion, according to the Ministry of Commerce. The decline, the third consecutive monthly contraction, has been attributed to weak global demand, high interest rates, and supply chain disruptions in key markets. Yet within this gloomy landscape, climate tech exports have thrived, driven by surging demand in Europe, the Middle East, and the United States.
Solar modules led the charge, contributing $5.1 billion in exports—a 41% increase from the previous fiscal year. Battery components, including anodes and separators, grew 56% to $2.3 billion, while electrolyzer exports tripled to $680 million. Even carbon capture and storage equipment, a nascent category, posted a 180% growth rate, reaching $120 million.
The data underscores a structural shift: climate tech is no longer a peripheral segment but a material driver of export growth. Unlike traditional manufacturing sectors, which are grappling with margin compression and logistical bottlenecks, climate tech is benefiting from global decarbonization mandates and industrial policies in key markets. The European Union’s Carbon Border Adjustment Mechanism (CBAM), fully implemented in January 2026, has accelerated demand for low-carbon industrial inputs, while the U.S. Inflation Reduction Act continues to subsidize clean energy imports from trade partners.
Why It Matters: A New Trade Pillar for India
The growth in climate tech exports is not merely a statistical anomaly but a potential inflection point for India’s trade strategy. For decades, the country’s export economy has relied on labor-intensive sectors like textiles, engineering goods, and gems and jewellery. However, these industries are increasingly vulnerable to global competition, automation, and shifting consumer preferences. Climate tech, by contrast, offers a pathway to higher-value manufacturing, reduced trade deficits, and alignment with global sustainability goals.
India’s competitive edge in climate tech stems from its existing industrial base. The country is already the world’s third-largest producer of solar modules, with an annual capacity of 60 gigawatts, and hosts over 15 gigawatt-hours of lithium-ion battery manufacturing. While China remains the dominant player in global supply chains, India’s lower labor costs, growing technical workforce, and preferential trade agreements with the EU and UAE have created a window for export-led growth.
The government has begun to recognize the sector’s potential. In April 2026, the Ministry of Commerce launched a $1.2 billion Production-Linked Incentive (PLI) scheme for advanced chemistry cells and electrolyzers, aiming to add 50 gigawatt-hours of battery storage capacity and 10 gigawatts of green hydrogen production by 2030. The scheme is expected to attract $3.5 billion in private investment over the next three years, according to ministry estimates.
Background and Context: From Niche to Necessity
India’s climate tech sector has evolved rapidly over the past decade, transitioning from a fledgling industry to a critical component of the country’s industrial strategy. The shift has been driven by a combination of domestic policy initiatives and global market forces.
Domestic Policy Push:
– The National Solar Mission, launched in 2010, set ambitious targets for solar capacity expansion, which in turn spurred domestic manufacturing.
– The PLI scheme for solar modules, introduced in 2021, provided financial incentives for local production, helping India reduce its reliance on Chinese imports.
– The 2022 National Hydrogen Mission aimed to position India as a global hub for green hydrogen, with a target of producing 5 million tonnes annually by 2030.
Global Market Forces:
– The EU’s CBAM, which imposes carbon tariffs on imports from countries with weaker climate regulations, has created a competitive advantage for Indian exporters of low-carbon goods.
– The U.S. Inflation Reduction Act, passed in 2022, offers tax credits and subsidies for clean energy imports from trade partners, further boosting demand for Indian climate tech products.
– The UAE and other Gulf nations, traditionally reliant on fossil fuels, are increasingly investing in renewable energy, creating new export opportunities for Indian solar and hydrogen technologies.
Despite these tailwinds, India’s climate tech sector remains heavily concentrated in a few product categories. Solar modules account for 40% of total climate tech exports, while battery components and electrolyzers, though growing rapidly, are still dependent on imported raw materials such as lithium and nickel. This reliance exposes producers to price volatility and supply chain risks, particularly as global competition for critical minerals intensifies.
Competing Claims and Uncertainty: Can the Momentum Be Sustained?
While the growth in climate tech exports is undeniable, questions remain about the sector’s long-term viability and scalability. Economists and industry experts are divided on whether the current momentum can be sustained without further policy intervention.
Optimistic View:
Proponents argue that climate tech represents a natural evolution for India’s export economy. Unlike traditional manufacturing, which is often subject to cost pressures and thin margins, climate tech offers higher value-added products with strong demand drivers. The sector also aligns with India’s broader goals of reducing fossil fuel imports and achieving net-zero emissions by 2070.
“The growth in climate tech exports is not just a short-term blip but a reflection of India’s ability to scale niche manufacturing at competitive costs,” said an analyst at The Core. “If the government can address supply chain bottlenecks and improve certification frameworks, the sector could become a new pillar of India’s trade economy.”
Skeptical View:
Critics caution that India’s climate tech sector is still in its early stages and faces significant challenges. The country’s reliance on imported raw materials, particularly for battery production, could undermine its cost competitiveness. Additionally, the lack of a unified certification framework for low-carbon industrial goods could hinder access to markets with strict sustainability standards, such as the EU.
“India’s climate tech exports are growing, but they are still a drop in the bucket compared to China’s dominance in the sector,” said a trade economist at the Indian Council for Research on International Economic Relations (ICRIER). “To truly compete, India will need to invest in domestic raw material processing, improve quality standards, and negotiate better trade terms with key markets.”
Key Uncertainties:
1. Raw Material Dependence: India currently imports over 80% of its lithium and nickel requirements, exposing the battery sector to price volatility and geopolitical risks.
2. Certification Gaps: The absence of a unified certification framework for low-carbon goods could limit access to markets with stringent sustainability standards.
3. Policy Consistency: While the government has introduced several incentives for climate tech, concerns remain about the consistency and longevity of these policies, particularly in the face of political changes.
What to Watch Next: Policy, Investment, and Global Competition
The coming months will be critical in determining whether India’s climate tech sector can transition from a bright spot to a sustained driver of export growth. Several key developments will shape the sector’s trajectory:
1. PLI Scheme Implementation:
The success of the $1.2 billion PLI scheme for advanced chemistry cells and electrolyzers will be a litmus test for the government’s ability to attract private investment. Industry watchers will be closely monitoring whether the scheme can deliver on its targets of adding 50 gigawatt-hours of battery storage capacity and 10 gigawatts of green hydrogen production by 2030.
2. Raw Material Security:
India’s ability to reduce its dependence on imported lithium and nickel will be crucial. The government has already taken steps to secure critical mineral supplies, including partnerships with Australia and Argentina. However, the pace of these efforts will determine whether India can achieve cost competitiveness in battery production.
3. Certification and Standards:
The development of a unified certification framework for low-carbon industrial goods will be essential for accessing markets like the EU. The Ministry of Commerce has indicated that it is working on such a framework, but the timeline for its implementation remains unclear.
4. Global Trade Dynamics:
The outcome of ongoing trade negotiations with the EU and other key markets will shape India’s climate tech export prospects. The EU’s CBAM, in particular, could either create opportunities or pose challenges, depending on how India adapts to the new regulatory landscape.
5. Private Sector Investment:
The flow of private capital into climate tech will be a key indicator of the sector’s long-term viability. While the PLI scheme has attracted initial interest, sustained investment will depend on the government’s ability to create a stable and predictable policy environment.
Conclusion: A Rare Bright Spot with Long-Term Potential
India’s export slump has reignited debates about the country’s trade strategy, with some economists advocating for a renewed focus on labor-intensive sectors like textiles and electronics. However, the rapid growth in climate tech exports suggests an alternative path—one that leverages India’s existing industrial strengths and aligns with global policy trends.
The sector’s resilience underscores a broader shift in global trade: decarbonization is no longer a compliance burden but a commercial opportunity. For India, which has historically relied on fossil fuel imports, climate tech offers a chance to reduce trade deficits while creating high-skilled jobs. The challenge now is to accelerate this transition without repeating the pitfalls of past industrial policies, such as over-reliance on subsidies or protectionist trade barriers.
For now, the data offers a rare bright spot in an otherwise gloomy export landscape. If sustained, climate tech could emerge as a new pillar of India’s trade economy—one that is both economically viable and environmentally necessary. The question is whether the government, industry, and investors can work together to turn this potential into reality.
Story synopsis gathered from: The Core — source.
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Story synopsis gathered from: Google News India — source.
