The environmental and economic impacts of India’s emergence as the global manufacturing hub

Abstract With the rise of labor costs in China, constraints on resources and environment, and ongoing geopolitical conflicts, the global manufacturing hub is facing relocation. India has emerged as the most likely candidate to undertake industrial relocation. This shift could reshape the global carbon emission landscape. However, ex ante measurement of the environmental effects of such industrial relocation is poorly understood. As an illustrative case, we first measure the impact on carbon emissions from shifting iPhone production to India and find that such a move would double the carbon footprint of production. We then extend our analysis to the general industrial chain and examine the implications of such shifts on a broader scale. We find that India’s process of becoming the global manufacturing hub will lead to increased carbon emissions and reduced global economic growth. The carbon burden surpasses the emission reductions achieved by the EU since the Copenhagen Climate Conference. At the sector level, the computer, basic metals, electronic equipment, and automotive sectors are the largest sources of incremental carbon emissions. To offset the extra emissions, it is essential to ensure that the industrial structure of these sectors temporarily remains unchanged while promoting technological progress in developing countries are essential to offset the extra emissions.