Sustainable Industrialization in India: Public Perceptions, MSME Challenges, and Cluster- Based Green Transition

Sustainable Industrialization in India: Public Perceptions, MSME Challenges, and Cluster- Based Green Transition

Rohit Kishor

Department of Management, MBA Vishwakarma University Pune, Maharashtra, India

Dr. Radhakrishna Batule

Professor, Department of Management, MBA Vishwakarma University

Pune, Maharashtra, India

Abstract For India to balance social justice, environmental pro-tection, and economic growth, sustainable industrialization has become a national imperative. Greenhouse gas emissions reached an estimated 3.22 billion tonnes of CO2 in 2025, even as renewable energy capacity crossed 50.07% of total installed power (484.82 GW), enabling India to meet its COP26 targets ahead of schedule. However, industrial activities continue to gen-erate pollution, deplete resources, and deepen regional and so-cial inequalities.

This study uses a mixed-methods design combining a primary survey of 70 respondents across India, secondary data from gov-ernment and international reports, case studies of industrial clusters, and an extensive literature review. The analysis identi-fies four interlinked pillars for a sustainable industrial future: unified policy frameworks, technological innovation and circu-lar economy practices, green finance and MSME empowerment, and cluster-based strategies for collective compliance.

Survey findings reveal that 91.4% of respondents are aware of sustainability concepts, 97.1% believe industries contribute sig-nificantly to pollution, and 68.6% prefer buying from companies that follow eco-friendly and fair practices. A total of 50.0% are willing to support renewable energy use even at higher prices, while 50.7% see high cost/finance as the key barrier for MSMEs to adopt green practices.

The results highlight strong public support for inclusive green industrialization, with 78.3% favouring fair jobs and inclusion of women and weaker sections and 68.6% endorsing cluster-based industrial development with shared green infrastructure. The paper recommends phased policy, financial, and managerial interventions to promote MSME greening, strengthen cluster governance, and advance a just transition aligned with Indias net-zero 2070 commitment.

Keywords Sustainable industrialization, MSMEs, Industrial clusters, Green finance, Public perception, Green

transition, Circular economy, Net-zero 2070, CETPs, Green manufacturing, Environmental sustainability

1. INTRODUCTION

   Industrialization has long been the backbone of modern eco-nomic development in India, acting both as a driver of growth and a source of environmental and social stress. Post-

   independence policy regimes moved from state-led planning to economic liberalization in the 1990s and, more recently, toward globalization and competitiveness. The traditional growth path, based on resource-intensive production and un-even regional development, is increasingly incompatible with the realities of climate change, resource scarcity, and persis-tent inequality. Sustainable industrialization has therefore emerged as a strategic national priority, seeking to integrate economic performance with environmental stewardship and social inclusion. This paper examines how India can transi-tion from a high-emissions, resource-heavy industrial model to a more resilient, inclusive, and low-carbon industrial sys-tem, with a particular focus on the role of MSMEs and indus-trial clusters.

   1. Rationale for Sustainable Industrialization India is currently one of the worlds largest emitters of carbon, with industry especially steel, cement, and chemicals contributing a significant share of overall emissions. Without decisive mitigation measures, industrial emis-sions risk undermining Indias Paris Agreement commit-ments and long-term ecological security. Industrialization has also been spatially and socially uneven, with indus-trial hubs concentrated in select states while large regions remain underdeveloped. High levels of labour informality, gender disparities, and the marginalization of weaker sec-tions further accentuate exclusion. Survey evidence from this study shows that 78.3% of respondents believe indus-tries should focus on fair jobs and inclusion of women and weaker sections.

      MSMEs form the backbone of Indias industrial base, contributing close to 30% of GDP and employing over 100 million people, yet face financial, technological, and infrastructural constraints in adopting green practices. In the survey, 50.7% of respondents identified high cost/fi-nance as the biggest barrier for MSMEs, followed by lack of awareness (21.7%) and lack of technology (11.6%).

   2. Current Policy Landscape and Green Industrializa-tion From the 2010s onward, sustainability has gained prominence in industrial and energy policy through re-newable energy targets, energy-efficiency programmes

      such as Perform, Achieve and Trade (PAT), and sector-specific interventions. The National Green Hydrogen Mission (2023) aims to promote green hydrogen for de-carbonizing hard-to-abate sectors, while the Green Steel Mission (2024) targets emission reductions in one of the most carbon-intensive industries. Recent initiatives em-phasise green MSME policies, cluster-level greening, and incentives for advanced technologies including car-bon capture, utilization and storage (CCUS). The National Manufacturing Mission positions clean-tech manufactur-ingsuch as solar PV modules, EV batteries, and wind turbinesas central to Indias strategy for aligning indus-trialization with its net-zero 2070 trajectory.

   3. Research Gap and Significance Existing literature on sustainable industrialization in India often treats environ-mental and economic dimensions separately and pays lim-ited attention to social inclusion and public perceptions. Case studies frequently focus on specific sectors or re-gions, offering limited insight into nationwide patterns or cross-cluster lessons. There is also a shortage of integrated frameworks linking industrial policy, MSME dynamics, cluster-based approaches, and citizen attitudes to sustain-ability. This research contributes by combining literature review, policy analysis, case evidence, and updated pri-mary survey data from 70 respondents to develop a holis-tic framework that balances economic, environmental, and social priorities.

2. LITERATURE REVIEW

   1. Academic and Policy Perspectives

      Singh and Kumar (2020) trace Indias industrial policy evo-lution and find that while sustainability rhetoric has strength-ened, implementation and monitoring mechanisms remain weak, underscoring the need for coherent targets and incen-tives. UNIDO (2021) highlights the potential of green indus-trial clusters, showing that shared infrastructure such as com-mon effluent treatment plants (CETPs) and energy services can reduce compliance costs and accelerate technology diffu-sion, provided governance and financing are robust. NITI Aayog (2020) stresses publicprivate partnerships, technol-ogy adoption, and data-driven monitoring to align industrial growth with sustainable development. The World Bank (2022) suggests that early gains can be achieved through en-ergy efficiency and targeted electrification, while process-in-tensive sectors require long-term technology shifts. Das and Rao (2021) analyse MSMEs and conclude that although some firms innovate locally, many lack access to capital, skills, and market incentives, reinforcing the importance of tailored fi-nance and technical asistance.

   2. Case Studies of Sustainable Practices in India

   Several industrial clusters illustrate practical pathways to-wards sustainable industrialization. The Tirupur textile clus-ter in Tamil Nadu has implemented CETPs and water-recy-cling systems that significantly reduce effluent pollution. The

   Surat diamond and textile cluster demonstrates cost savings and competitiveness gains through large-scale solar adoption and efficient machinery. The Morbi ceramic cluster in Gujarat has shifted to gas-based kilns and waste-heat recovery, reduc-ing air pollution and improving product quality. In Kanpurs leather cluster, CETPs have helped mitigate severe water pol-lution, while Pithampur in Madhya Pradesh has piloted circu-lar economy initiatives involving material recovery, recy-cling, and waste-to-energy solutions. These cases show that cluster-based interventions can combine environmental com-pliance with economic gains when supported by appropriate institutional and financial arrangements.

3. RESEARCH OBJECTIVES

   This study aims to:

   • Analyse the evolution of Indias industrial policies towards sustainable and inclusive growth.

   • Examine the role of MSMEs in driving green and climate-resilient industrial development.

   • Evaluate the impact of industrial clusters on re-source efficiency and emission reduction.

   • Identify key challenges in implementing sustainable industrialization, including financial, technological, and regulatory barriers.

   • Assess the effectiveness of green manufacturing technologies in reducing industrial carbon foot-prints.

   • Explore social inclusion dimensions such as gender participation, employment for marginalized groups, and regional equity.

   • Examine the integration of circular economy prac-tices in industrial sectors.

   • Evaluate how sustainable industrialization affects economic competitiveness and productivity.

   • Analyse public perceptions, awareness, and attitudes through primary survey research.

   Propose actionable strategies and frameworks to balance growth, environmental sustainability, and social inclusion in Indias industrial sector.

4. RESEARCH METHODOLOGY

   1. Research Design The study follows a descriptive-ex-ploratory design, integrating policy analysis, literature review, case study evaluation, secondary data synthesis, and primary survey data. This mixed-methods approach is intended to provide both breadth and depth on sustain-able industrialization and MSME dynamics.

   2. Primary Data Collection A structured questionnaire items was administered through Google Forms between September 2025 and February 2026. The instrument cov-ered demographics, awareness of sustainability, percep-tions of industrial pollution, views on MSMEs and green practices, consumer preferences, policy support, and per-ceived barriers. Convenience sampling was used, target-ing Indian residents with at least basic awareness of

      industrial and environmental issues. A total of 70 re-spondents completed the survey, and ongoing survey.

   3. Secondary Data, Case Studies, and Global Bench-marking Secondary data were drawn from government reports (e.g., Ministry of Commerce and Industry, NITI Aayog, Central Pollution Control Board, MoEFCC), in-dustry and ESG reports, academic publications, and in-ternational organizations such as the World Bank, IEA, UNIDO, and WRI. Few case studies were selected pur-posively from Indian industrial clusters and MSMEs that have adopted green practices, circular economy models, or inclusive employment strategies. Global benchmark-ing compared Indias approaches with those of leading countries in sustainable industrialization to assess the transferability of international best practices to the Indian context.

   4. Sampling Strategy For the primary survey, respondents were required to be Indian residents with at least basic awareness of industrial and environmental issues. The gender distribution was 51.4% male (36) and 48.6% fe-

      male (34). Among 69 valid occupation responses, 53.6% were other, 27.5% salaried, 15.9% self-employed, and 2.9% business owners. For the case studies, purposive sampling was used based on adoption of green technolo-gies, participation in industrial clusters, evidence of so-cial inclusion, and ESG compliance.

      Gender Distribution
      Male	51.4% (36)
      Female	48.6% (34)

      Occupation
      Salaried	27.50%
      Self Employed	15.90%
      Business Owner	2.90%
      Other	53.60%

5. DATA ANALYSIS AND FINDINGS

   1. Awareness and Perceptions of Industrial Pollution A total of 91.4% of respondents had heard of sustaina-bility or green industry. Overall, 97.1% believed that industries contribute significantly to pollution, with 55.7% answering Yes, a lot and 41.4% Yes, but some industries. When asked about the most critical type of pollution caused by industries, 61.4% cited air pollution, followed by waste (18.6%) and water pollution (17.1%). An overwhelming 65.7% considered it very important and 24.3% important that industries reduce pollution, indicating strong public concern.

      Fig. 1 – Awareness of Sustainability and Green Industry.

      70.00%

      60.00%

      50.00%

      40.00%

      30.00%

      20.00%

      10.00%

      0.00%

      Air Pollution Water Waste Noise

      Pollution Pollution Pollution

      Fig. 2: Perception of Industrial Contribution to Pollution in India.

      	61.40%
      		17.10% 18.60% 2.90%

      Fig. 3: Major Types of Pollution Caused by Industries.

   2. Views on MSMEs and Green Practices Two-thirds of respondents (67.1%) believed MSMEs can play a role in protecting the environment, though 22.9% were not sure and 8.6% disagreed. A majority (60.0%) reported seeing or hearing of industries near them adopting eco-friendly practices such as solar power, recycling, or energy-sav-ing machines. High cost/finance emerged as the domi-nant perceived barrier for MSMEs to adopt green prac-tices, selected by 50.7% of respondents, followed by lack of awareness (21.7%) and lack of technology (11.6%). Only 8.7% choose lack of government support, and 7.2% no demand for eco-friendly products, suggesting that financial and informational constraints overshadow pure demand-side issues.

      Yes No Not Sure

      22.90%

      8.60%

      67.10%

      Fig. 4: Perception of MSMEs Role in Environmental Protec-tion

      Fig. 5: Perceived Barriers for MSMEs in Adopting Green Practices

      Depen ds on

      Yes, 68.60%

      Yes No Depends on Price

1. Consumer Preferences and Behaviour A total of 68.6% of respondents said they would prefer buying from companies that follow eco-friendly and fair prac-tices, and another 24.3% said it would depend on price. Similarly, 50.0% would support industries using renew-able energy even if products cost more, while 35.7% said maybe and only 8.% said no. Environmental con-cerns already influence behaviour: 54.3% reported hav-ing avoided a product because they thought it was harm-ful to the environment, and 34.3% had done so some-times. When asked how they would support green indus-tries, 37.7% chose paying slightly more for eco-friendly products, 34.8% spreading awareness, and 24.6% choosing eco-friendly brands over others.

   Fig. 6: Consumer Preference for Eco-Friendly and Fair Practice Companies.

   Yes No Maybe

35.70%

50.00%

8.60%

Fig. 7: Consumer Willingness to Support Renewable Energy-Based Industries at Higher Cost.

1. Social Inclusion and Employment A combined 78.3% either strongly agreed (50.7%) or agreed (27.5%) that in-dustries should focus on fair jobs and inclusion of women and weaker sections. Only 2.9% disagreed and 18.8% were neutral. Regarding jobs, 71.4% believed sustainable industries can create more employment in India, 20.0% were not sure, and 7.1% disagreed. These results indicate that respondents do not see green transitions as inher-ently job-destroying and instead expect net employment gains.

   20.00%

   7.10%

   71.40%

   Yes No Not Sure

Fig. 8: Attitude Toward Social Inclusion in Industries.

Fig. 9: Perception of Job Creation Potential.

1. Policy, Governance, and Cluster-Based Approaches Views on government performance were mixed: 35.7% felt the government is not doing enough to promote sus-tainable industries, 32.9% believed it is, and 28.6% were not sure. At the same time, 62.9% believed industries can

   28.60%

   32.90%

   35.70%

   Yes No Not Sure

   adopt green practices with the support of government in-centives such as tax breaks, subsidies, and training. Re-garding leadership, 51.5% stated that government, busi-nesses, and consumers should act together, 29.4% se-lected government alone, 11.8% business owners, and 7.4% consumers. Cluster-based industrial development with shared green infrastructure (e.g., CETPs, waste treatment plants) was supported by 68.6% of respond-ents, with 17.1% not sure and 11.4% opposed. Finally, 54.3% believed India can become a global leader in green and sustainable industries, 27.1% said maybe, and the remaining respondents were either unsure or disagreed.

   Fig. 10: Public Opinion on Government Efforts to Promote Sustainable Industries in India.

   support for social inclusion and green job creation under-scores the importance of designing just transition policies that combine worker protection, skill development, and opportu-nities for women and marginalized groups. Mixed views on government performance but high confidence in incentives point to a need for visible, well-communicated programmes that bridge policy intent and on-ground implementation.

   1. CONCLUSION AND MANAGERIAL IMPLI-

      CATIONS

      India faces a critical imperative to shift from resource-inten-sive, pollution-heavy industrialization toward a sustainable model that balances growth, employment, and environmental protection. The survey results show high awareness of sus-tainability (91.4%), widespread recognition of industrial pol-lution (97.1%), and strong preferences for eco-friendly and fair-practice companies (68.6%). Financial constraints, par-ticularly for MSMEs, remain the central obstacle to green adoption, while cluster-based approaches and shared infra-structure enjoy broad public support (68.6%). Social inclu-sion expectations are high, with 78.3% of respondents in fa-vour of fair jobs and inclusion of women and weaker sections, and more than 71% seeing sustainable industries as a source of job creation. To translate this mandate into practice, coor-dinated action is required among policymakers, large enter-prises, MSMEs, industry associations, and consumers, with a focus on green finance, cluster governance, technology diffu-sion, and just transition support.

      1. Implications for Large Enterprises

         • Integrate ESG proactively into core strategy to gain advantages in market access, investor relations, and

           51.50%

           7.40%

           60.00%
           50.00%
           40.00%	29.40%
           30.00%
           20.00%		11.80%
           10.00%
           0.00%

           operational efficiency.

           • Green supply chains by supporting MSME suppliers with technical assistance, co-investment, and longer-term contracts.

             Fig. 11: Perceived Responsibility for Promoting Sustainable Industries.

             Discussion The findings confirm a strong public mandate for sustainable industrialization, combining high awareness of sustainability with concern about industrial pollution and support for green products. This aligns with international ev-idence that consumer preferences increasingly favour envi-ronmentally responsible firms and suggests growing domes-tic market space for green offerings. The emphasis on finance as the main barrier for MSMEs indicates that green transitions will require targeted credit, concessional finance, and risk-sharing mechanisms rather than purely regulatory pressure. Cluster-based strategies, backed by the case evidence from Tirupur, Surat, Morbi, Kanpur, and Pithampur, offer an effec-tive way to spread costs, share infrastructure, and facilitate technology diffusion, especially for smaller firms. Strong

           • Invest in clean technologies and proprietary sustain-ability innovations to differentiate products and ser-vices.

           • Enhance transparent sustainability reporting to build trust and signal long-term resilience.

      2. Implications for MSMEs

         • Prioritise low-cost, quick-payback energy efficiency measures such as efficient motors and lighting to free resources for deeper upgrades.

         • Leverage cluster organizations for shared infrastruc-ture, collective procurement, and knowledge shar-ing.

         • Actively access government schemes, subsidies, and credit lines designed for green adoption.

         • Communicate sustainability achievements to cus-tomers and buyers, especially in B2B markets where ESG performance is a selection criterion.

      3. Implications for Industry Associations and Poli-cymakers

         • Develop centralized knowledge platforms on tech-nologies, financing options, regulations, and best practices.

           • Promote collective procurement of green technolo-gies to reduce costs for member firms.

           • Facilitate peer learning networks and cluster-level pilot projects to demonstrate benefits and build con-fidence.

           • Design targeted green finance and incentive instru-ments that address MSME risk perceptions and col-lateral constraints.

           • Embed social inclusion objectives into industrial and climate policies, including skills programmes, sup-port for women-led enterprises, and safeguards for vulnerable workers.

1. REFERENCES

   1. Tirupur Textile The Textile City in India Yoganan-dan G (PDF) An overview of Tirupur: The Textile city in India

   2. Tirupur Textile Cluster Water Recycling and CETPs https://www.textilepact.net/wp-content/up-loads/2019/12/zero-liquid-discharge.pdf

   3. Surat Diamond and Textile Cluster Renewable En-ergy Adoption https://india.monga-bay.com/2024/02/stitching-sustainability-amidst-cli-mate-change-challenges/

   4. Solar adoption in textiles: https://writecan-vas.in/blog/green-energy-surat-takes-a-kangaroo-leap/

   5. Morbi Ceramic Cluster (Gujarat) Gas-based kiln technology https://www.sameeeksha.org/pdf/dpr/MRV_CRM8.pd f

   6. Waste heat recovery pro-ject: https://www.scribd.com/docu-ment/388170408/E6-35-43-00

   7. Kanpur Leather Cluster Common Effluent Treatment Plants (CETPs) https://journalcjast.com/in-dex.php/CJAST/article/view/3268

   8. Indo-Dutch project support: https://footwearsinfolin-ethree.tripod.com/Leather_Sector_Study_kanpur.doc

   9. Pithampur Industrial Cluster Circular Economy Initi-atives

      https://www.pib.gov.in/PressRe-leaseIframePage.aspx?PRID=2108165pib.gov

   10. McKinsey Industrial decarbonisation pathway https://www.mckinsey.com/capabilities/sustainabil-ity/our-insights/decarbonising-india-charting-a-path-way-for-sustainable-growth

   11. WRI India Greening MSMEs https://wri-in-dia.org/perspectives/greening-msmes-critical-indias-cleanenergy-transition

   12. World Economic Forum Industrial clusters & energy transition (PDF) https://reports.wefo-rum.org/docs/WEF_Accelerating_In-dia%E2%80%99s_Energy_Transition_through_In-dustrial_Clusters_2025.pdf

   13. MoEFCC India Long-Term Low Emission Develop-ment Strategy (LT-LEDS) (PDF, UNFCCC) https://un-fccc.int/sites/default/files/resource/In-dia_LTLEDS.pdf

   14. MoEFCC Indias LT-LEDS submission (Govern-ment PDF copy) https://moef.gov.in/up-loads/2022/11/Indias-LT-LEDS.pdf

   15. Press Information Bureau Long-Term Low Emission Development Strategy press notes https://www.pib.gov.in/PressReleaseP-age.aspx?PRID=1875816

   16. World Bank Indias Economic Growth and Environ-mental Sustainability

       (OpenKnowledge)https://openknowledge.worldbank. org/entities/publication/056c1226-777e51b6-a514-98554d5ef7fc

   17. World Bank Indias economic growth and environ-mental sustainability (RePEc working pa-per)https://ideas.repec.org/p/wbk/wbrwps/6208.html

   18. UN PAGE India: unlocking inclusive and green manufacturing growth https://www.un-page.org/news/india-unlocking-inclusive-and-greenmanufacturing-growth/

   19. UN PAGE Country page: India and green economy

       / SDGs https://www.un-page.org/countries/india/

   20. UN India India steps towards a green and inclusive economy https://india.un.org/en/162589-india-steps-towards-green-and-inclusiveeconomy

   21. MoEFCC Indias Third Biennial Update Report to UNFCCC (industrial emissions context, PDF) https://moef.gov.in/uploads/2024/01/INDIA_BUR-3.pdf

   22. PIB Strategies for achieving net-zero emissions (Par-liament reply) https://www.pib.gov.in/PressRe-leaseIframePage.aspx?PRID=2042999

   23. EY India Indias green manufacturing revolution and the journey to net-zero https://www.ey.com/en_in/in-sights/energy-resources/india-s-greenmanufacturing-revolution-and-the-journey-to-net-zero

   24. World Bank India: Strengthening Institutions for Sustainable Growth

       https://openknowledge.worldbank.org/entities/publi-cation/2b67b6de-5b5b-5db8-b073-c6298160d77d

2. APPENDIX

Appendix A

The primary data were collected from the respondents with the following questions in this research study. The survey was completed online and recorded on Google Forms.

1. Have you heard about the term sustainability or green industry?

2. Do you think industries in India contribute signifi-cantly to pollution?

3. Which type of pollution do you think industries cause the most?

4. Do you believe small businesses (MSMEs) can play a role in protecting the environment?

5. Have you seen or heard of industries near you adopting eco-friendly practices (solar, recycling, energy-saving machines)?

6. Would you prefer buying from companies that follow eco-friendly and fair practices?

7. Would you support industries using renewable energy (solar, wind) even if products cost a bit more?

8. Do you think industries should also focus on fair jobs and inclusion of women and weaker sections?

9. Do you think sustainable industries can create more jobs in India?

10. How important is it for you personally that industries reduce pollution?

11. Have you ever avoided a product because you thought it was harmful for the environment?

12. What do you think is the biggest barrier for small busi-nesses (MSMEs) to adopt green practices?

13. Do you think customers in India care about eco-friendly products?

14. Do you think industries can balance growth, jobs, and environmental protection together?

15. Do you think the Indian government is doing enough to promote sustainable industries?

16. Who should take the lead in promoting sustainable in-dustries?

17. Do you believe that industries can adopt green prac-tices with the support of government incentives such as tax breaks, subsidies, and training?

18. Would you support cluster-based industrial develop-ment (industries working together with shared green infrastructure like waste treatment plants)?

19. Would you be willing to support green industries by:

20. Do you think India can become a global leader in green and sustainable industries?

Appendix B

The survey was initially designed and distributed with the Google Forms. The online version of the questionnaire, with original format and response layout, can be accessed via the link provided below.

https://docs.google.com/forms/d/e/1FAIpQLScnC3YItDRaA u_qmLOA2in8wYCMYMzkHTnIwXcXPORDtUIffQ/view-form?usp=sharing&ouid=102901556703091113310