India's ambition to become the world's next manufacturing superpower and a leading voice of the Global South is well documented. New Delhi is courting global supply chains shifting away from China, pushing high-tech manufacturing, and positioning itself as a hub for artificial intelligence and semiconductors. It also wants to shape global climate diplomacy. Yet one of the most formidable obstacles to these goals may not come from rival powers but from the deteriorating state of India's own environment.
Environmental governance has become a critical dimension of national power. In today's economy, industrial competitiveness depends not only on labor costs and market size but also on resilient infrastructure, reliable electricity, water security, public health, and climate resilience. Countries that manage these challenges well gain an edge in attracting investment, advancing manufacturing, and fostering innovation. Those that fail risk undermining their own strategic ambitions.
The 2026 Environmental Performance Index (EPI), compiled by researchers at Yale and Columbia universities, underscores this challenge. India ranks 176th out of 177 countries, ahead of only Laos, with an overall score of 22.46 out of 100. Estonia tops the list with 74.79. India also ranks last among South Asia's eight countries. While the index's methodology has been questioned, India's consistently poor performance—including a last-place finish in 2022—points to deep structural problems rather than a statistical anomaly.
Environmental governance as an economic advantage
As global competition shifts from low-cost manufacturing to resilient, technology-intensive supply chains, environmental governance is becoming a competitive advantage rather than a mere regulatory obligation. Investors increasingly evaluate countries not only on tax incentives and labor availability but also on climate risk, resource security, regulatory quality, and infrastructure resilience.
For India, these issues are directly tied to its development strategy. The country's goal of becoming a global manufacturing hub depends on attracting industries that require uninterrupted electricity, secure water supplies, efficient logistics, and healthy urban environments. Electronics, pharmaceuticals, semiconductor fabrication, AI infrastructure, and hyperscale data centers all rely on reliable environmental infrastructure. Semiconductor plants alone require vast amounts of ultra-pure water and continuous power.
India's environmental challenges are increasingly intersecting with labor productivity, industrial policy, energy security, and climate resilience. Persistent air pollution raises healthcare costs and reduces workforce productivity. Heatwaves disrupt manufacturing, construction, and logistics while boosting electricity demand. Water stress threatens both agriculture and industrial expansion, particularly in fast-growing economic corridors. Climate-related disruptions also strain transport networks, energy systems, and urban infrastructure.
These pressures should not be viewed in isolation. Together, they shape India's economic resilience as much as its environmental future.
Asia's green competition intensifies
Environmental governance is also becoming part of strategic competition across Asia. China has spent years investing in pollution control around major manufacturing regions after environmental degradation began affecting productivity, public health, and social stability. Vietnam increasingly promotes itself as a resilient manufacturing destination for companies diversifying beyond China. Indonesia is linking sustainable mineral processing to its ambitions in electric vehicle and battery supply chains.
Each of these countries faces significant environmental challenges of its own. Yet they increasingly recognize that environmental performance influences competitiveness in global markets. The contest for investment is no longer determined solely by wages or tax incentives. It is also shaped by infrastructure resilience, regulatory credibility, and sustainability standards.
India's challenge is particularly acute because its economic ambitions extend well beyond traditional manufacturing. New Delhi aims to become a major destination for AI, cloud computing, digital infrastructure, and advanced electronics. These industries consume enormous amounts of electricity, require sophisticated cooling systems, and depend on secure water supplies. Reliable environmental infrastructure is therefore becoming an economic asset rather than simply an environmental objective.
From domestic policy to foreign policy
Environmental performance increasingly influences foreign policy and international economic relations. Global investors now incorporate environmental, social, and governance (ESG) considerations into their decisions. At the same time, trade policy is being shaped by environmental and carbon-related standards. Mechanisms such as the European Union's Carbon Border Adjustment Mechanism (CBAM) reflect a broader trend in which sustainability is becoming closely linked to export competitiveness and market access.
For India, these developments carry important strategic implications. The country seeks to position itself as a preferred destination for global supply chains, but its environmental record could deter investors and trade partners. The Hormuz crisis has already shown how external shocks can disrupt regional economies, but India's environmental vulnerabilities are largely self-inflicted.
India's domestic politics also play a role. The recent youth-led protests that forced an education minister's resignation highlight a generation increasingly concerned about governance and accountability. Environmental issues are likely to become a similar flashpoint, as young Indians bear the brunt of air pollution, water scarcity, and climate impacts.
India's environmental crisis is not just an ecological issue; it is a strategic one. If New Delhi fails to address these challenges, its great-power ambitions may remain out of reach. The world is watching, and investors are taking note.
