Impact of Climate Change and Climate Action on Indian manufacturing MSMEs and need for just transition in the sector: Evidence from Faridabad Industrial Cluster in India

Climate change is a global problem, and it impacts all entities. These impacts are different for each entity and are experienced disproportionately. To ensure a just transition, the impacts ensuing from climate change need to be studied. These impacts, including the ones resulting from transitioning away from climate change, are not well studied for some entities such as the micro, small, and medium scale enterprises (MSMEs). Due to their inherent lack of capacity, MSMEs are already very vulnerable. They are the ones responsible for about 50% of exports in India and are the second highest employer in the country. The social importance of this sector thus makes it imperative to ensure a smooth transition in this sector. In this study, we present a theoretical framework on how climate change (including climate action) might impact manufacturing industries. We then go on to explain how these impacts affect MSMEs differently as compared to large industries. The theoretical framework can be tailored to study impacts at individual, cluster, and sectoral levels. To operationalize the theoretical framework, we present a case study where we quantify the possible economic impacts of climate change on the Faridabad industrial cluster, which is one of the largest industrial clusters located in Northern India. Understanding the impacts will help minimize them, giving way to a just transition. Policymakers and individual factory owners can use the framework to identify avenues where there might be greatest impact to them, and develop a tailored strategy to overcome them.