India’s 69 million micro, small and medium enterprises (MSMEs) could slash up to 87 million tonne of carbon emissions over the next decade by rapidly adopting rooftop solar, energy-efficient machinery and cleaner fuels, while unlocking more than ?2 lakh crore in private investment, according to NITI Aayog’s “Roadmap for Green Transition of MSMEs” report.
The transition is projected to create over 55,000 green jobs and significantly strengthen the competitiveness of small businesses, which account for nearly 46% of India’s exports and around 30% of GDP. This comes at a time when global markets are tightening carbon compliance norms.
MSMEs remain among the most carbon-intensive segments of India’s industrial ecosystem, having emitted an estimated 135 million tonne of carbon dioxide equivalent in 2022 alone — largely due to heavy reliance on fossil fuels for electricity and industrial heat. The report warns that without rapid decarbonisation, the sector risks losing export market access as sustainability-linked trade rules, including carbon border taxes, gather momentum.
Fighting the Carbon Border Tax
At the core of the roadmap are three major decarbonisation levers — energy efficiency, green electricity adoption and alternate fuels — together capable of delivering 75–87 MtCO?e in emission reductions over the next 10 years.
Energy efficiency upgrades represent the single largest opportunity, with the potential to cut around 36 MtCO?e. The strategy prioritises large-scale replacement of outdated equipment — such as boilers, motors, cooling systems and heat exchangers — through Energy Service Companies (ESCOs), using pay-as-you-save models that eliminate upfront capital costs for MSMEs. Five high-emission sub-sectors and 10 MSME clusters with strong export exposure have been prioritised for immediate rollout.
The second pillar — green electricity adoption — could contribute 30–35 MtCO?e of emission reductions while mobilising nearly ?1.5 lakh crore in private capital. The roadmap strongly promotes rooftop solar deployment through Renewable Energy Service Company (RESCO) models, under which service providers install and operate systems and MSMEs purchase power at predetermined tariffs, avoiding capital expenditure. It also encourages uptake under the Green Open Access framework, enabling clusters with demand exceeding 100 kW to procure renewable power directly from generators.
Importantly, the roadmap estimates a requirement of about 6,031 MW of solar capacity across the top 10 electricity-intensive MSME clusters alone — a scale of deployment that could deliver emission reductions of roughly 12.9 MtCO?e in the first phase of implementation. This underscores the central role rooftop solar is expected to play in the sector’s decarbonisation drive.
To accelerate adoption among smaller units, the report proposes extending subsidy-backed rooftop solar schemes to micro enterprises, targeting coverage of 1–1.5 million units over five years.
The third lever focuses on fuel switching away from coal, furnace oil and pet coke towards natural gas, biomass, biogas and electrified processes, delivering an estimated 9–16 MtCO?e reduction over the decade. Energy-intensive sectors such as textiles, foundries, forging and steel have been identified for early intervention due to their high emission intensity and export significance.
Beyond climate gains, the roadmap positions the green transition as a catalyst for economic growth. The projected investment inflows are expected to expand domestic manufacturing of clean technologies, deepen ESCO and RESCO markets, and reduce long-term energy costs for MSMEs.
Institutional Backbone
To coordinate implementation at scale, NITI Aayog has proposed establishing a National Project Management Agency (NPMA) to aggregate demand across MSME clusters, manage transparent bidding processes for solution providers, and oversee performance-linked payouts. A comprehensive Monitoring, Reporting and Verification (MRV) framework will track emissions reductions, energy savings and financial outcomes — helping de-risk investments and attract private capital.
The roadmap also recommends the creation of a dedicated climate impact fund blending public and private capital to support low-carbon technologies and business models, particularly where commercial risks remain elevated.
Crucially, the report underscores that decarbonisation is evolving from a compliance obligation into a competitiveness strategy. With MSMEs contributing over a third of manufacturing output and nearly half of India’s exports, alignment with global sustainability standards is becoming central to the sector’s long-term growth trajectory.