Beyond Buzzwords: 4 Essential Elements for a Just Transition in India
India’s transition to a low-carbon economy presents significant economic opportunities, including new jobs. Key sectors such as automotive, power, textiles and construction —collectively employing over 160 million people — are already moving away from fossil fuels and high-emission production methods. However, without careful planning, the transition runs the risk of exacerbating social and economic inequalities.
As this shift accelerates, structural changes within these industries could disrupt livelihoods, particularly for vulnerable communities. Informal workers, small businesses, women and fossil-fuel-dependent regions face the highest risks, including job losses and economic instability. However, if managed effectively, this transition can create sustainable jobs, promote gender-inclusive growth and enhance regional economic resilience. The following four elements are key for a just and equitable low-carbon transition:
1. Support Small Businesses Through the Transition
India's 63 million micro, small and medium enterprises (MSMEs) contribute nearly 30% of GDP and employ over 110 million people. Yet, most struggle to adopt sustainable practices due to high costs, limited access to green finance and stringent regulatory requirements. Energy-efficient equipment and green manufacturing processes often require significant upfront investments that many MSMEs cannot afford.
Compliance with international policies, such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), increases operational costs for export-driven businesses, while supply chain disruptions in industries like steel and textiles threaten their stability. For example, MSMEs in the textile sector face heightened risks due to evolving sustainability requirements in global markets and increasing raw material costs. Similarly, MSMEs from the automotive value chains will be adversely impacted unless they pivot to manufacturing electric vehicle (EV) components, as the US and EU markets, which form 60% of the sector's exports, move towards EVs.
Blended finance models and viability gap funding for MSMEs can ease the financial burden of adopting green technologies. SIDBI’s Financing Mitigation and Adaptation Projects (FMAP) program leverages concessional finance and private sector investments to help MSMEs adopt low-emission, climate-resilient technologies and scale up green practices. Government-backed incentives and a streamlined, MSME-friendly policy framework will be critical in reducing regulatory hurdles to shift to low-carbon operations. Reskilling and upskilling the MSME workforce will be equally important in preparing them for a green economy.
2. Protect Informal Workers from Displacement
Over 90% of India’s workforce is engaged in informal employment. The transition to a low-carbon economy could disproportionately impact millions working directly or indirectly in coal mining, brick kilns, construction and waste management. In a globalized economy, such workers often lack legal protections and social security, making them highly vulnerable to economic shifts and environmental hazards. Lack of awareness about the benefits of formalization and government policies often leave informal workers hesitant to transition to formal structures.
Expanding social security coverage, including pension schemes and healthcare access, is crucial to safeguarding these workers. Wage security programs and financial assistance can provide immediate relief, while targeted reskilling initiatives can help them transition into emerging green jobs. Notable examples include Jharkhand’s initiative to document informal workers in mining regions and connect them to alternative employment pathways. Establishing similar worker registration systems nationwide will improve access to government benefits and create a more resilient workforce in a changing economy.
3. Address Gender Disparities in the Green Transition
Women, who constitute nearly 20% of India’s workforce, are disproportionately affected by industrial shifts. Sectors such as textiles and agriculture, where women play a dominant role, are undergoing significant transformations. Yet many reskilling programs fail to accommodate their specific needs. Unequal land ownership and limited digital access further limit women’s access to finance for climate-smart agricultural practices, while wage disparities persist in informal sectors like brick kilns. Additionally, large-scale renewable energy projects often displace rural women who rely on common lands for fuelwood, water and livestock grazing.
Targeted skilling programs that account for mobility and digital literacy barriers can increase women’s access to green jobs. The Mahila Housing SEWA Trust (MHT) provides a successful model by training women in climate-resilient construction techniques so they can benefit from the expansion of green building projects. Furthermore, sustainability-linked bonds tied to gender equity targets can support women-led businesses in the renewable energy and sustainable agriculture sectors. Blended finance models can expand financial access for women entrepreneurs and small farmers, ensuring their active participation in India’s green economy.
4. Bridge Regional Disparities in the Green Economy
India’s energy transition is occurring unevenly across states, creating disparities between coal-dependent regions and renewable energy hubs. States like Jharkhand, Chhattisgarh and Odisha rely heavily on coal, with over 50% of their revenue derived from fossil fuel industries. In contrast, Tamil Nadu and Gujarat are at the forefront of the renewable energy transition. This imbalance, coupled with inadequate local reskilling opportunities and weak infrastructure, can leave many coal-dependent regions without viable economic alternatives.
Targeted investments, such as the Coal India Rehabilitation Fund, can provide financial support along with social infrastructure, such as healthcare and education, to communities undergoing a transition. Place-based policies and economic diversification strategies must be tailored to the unique needs of transitioning regions. Odisha has done this by developing green industrial clusters to attract investment in non-coal sectors. Decentralized energy systems and localized industry hubs can generate employment in historically fossil-dependent areas. A unified national framework that harmonizes tariffs, grid access and financial incentives across states is crucial to maximize available resources and promote a balanced transition.
Urban transitions also require urgent attention, as growing cities face the dual challenge of decarbonization and inclusion. Coordinated governance frameworks, investment in climate-resilient infrastructure, expansion of affordable public transport and upgradation of informal settlements will be key to ensuring equitable outcomes for the already vulnerable urban low-income communities.
A just low-carbon transition in India must safeguard informal workers’ livelihoods, support MSMEs in transitioning, close gender gaps in economic participation and ensure fossil-dependent regions are not left behind. Without proactive measures, millions risk economic displacement and deepening inequality. However, with strong financial support, policy incentives, inclusive skilling programs and targeted regional strategies, India can transform this transition into an opportunity for sustainable and equitable growth.
This blog is based on insights from the India Just Transition Summit, hosted by WRI India and the Just Transition Research Centre at IIT Kanpur. The summit convened over 250 policymakers, researchers, civil society members and community representatives to explore strategies for a people-centered, low-carbon transition in India. Find more details here.