• India aims to cut steel emissions to 2 tons of CO₂ per ton by 2035–36 while expanding capacity to 400 million tons
• Estimated $183 billion investment required, with potential to create over 3 million jobs
• Policy responds to EU carbon tariffs and global pressure on high-emission industrial exports

India is preparing to reshape one of its most carbon-intensive industries as it balances rapid industrial expansion with mounting global climate pressure. Under a draft National Steel Policy 2025 reviewed by Reuters, the government is targeting a roughly 25% reduction in emissions from steel production over the next decade, while more than doubling output capacity.

The policy outlines a plan to reduce emissions intensity from current levels of about 2.65 metric tons of carbon dioxide per ton of finished steel to 2 tons by 2035–36. That benchmark would align India more closely with the global average, narrowing a gap that currently stands at roughly 32%.

Steel production accounts for 10–12% of India’s total emissions, making it one of the most critical sectors for the country’s long-term climate strategy.

“As steelmaking capacity grows, decarbonising the sector is crucial for meeting India’s net-zero emissions target by 2070,” the document said.

Pressure From Global Trade and Carbon Policy

India’s policy shift is not occurring in isolation. The introduction of the European Union’s carbon border tariff, which began applying fees on imports of steel and other high-emission goods earlier this year, has intensified pressure on exporters.

The mechanism is already reshaping trade flows and forcing Indian producers to reconsider both their cost structures and target markets. As compliance costs rise, the policy underscores a strategic pivot toward lower-carbon production methods and diversified export destinations.

India aims to more than double steel exports to 20 million tons by 2035–36, even as it adapts to stricter environmental standards in key markets.

Technology Shift and Infrastructure Gaps

To meet its emissions targets, the policy prioritises a transition away from coal-intensive processes. It proposes scaling up gas-based steelmaking, increasing scrap usage, and introducing incentives tied to continuous emissions reductions.

However, infrastructure remains a major constraint. Only 21% of blast furnace capacity and just 5% of direct reduced iron capacity currently have access to gas pipeline networks, limiting the near-term feasibility of large-scale fuel switching.

The policy calls for deeper collaboration with the oil ministry to secure overseas gas supplies and expand domestic pipeline infrastructure. It also highlights international partnerships with 19 countries, including Australia, Japan, Germany, Russia, and the United States, to support technology transfer and resource access.

Investment Scale and Economic Stakes

India’s steel expansion plans are closely tied to its broader economic trajectory. With infrastructure spending accelerating and demand rising, the country aims to increase crude steel capacity to 400 million tons by 2035–36, up from approximately 168 million tons today.

Achieving this scale will require an estimated 17 trillion rupees, or about $183.41 billion, in capital investment. The economic payoff could be substantial.

The steel sector currently employs 2.8 million people and contributes around 2.5% to India’s nearly $4 trillion economy. Expansion under the new policy could generate more than 3 million additional jobs over the next decade.

At the same time, the government is seeking to reduce reliance on imported coking coal, targeting a decline in import dependence from about 90% to 80% by 2035–36. This move reflects both cost concerns and geopolitical risk management.

What It Means for Investors and Industry Leaders

For corporate leaders and investors, India’s strategy highlights a complex but increasingly common challenge: scaling industrial output while decarbonising core processes.

The policy signals growing alignment between national industrial strategies and global climate frameworks. It also reinforces the importance of capital allocation toward cleaner technologies, infrastructure buildout, and supply chain diversification.

India’s steel sector sits at the intersection of trade policy, energy security, and climate risk. Decisions made over the next decade will influence not only domestic growth but also the country’s competitiveness in a global market where carbon intensity is becoming a defining metric.

As major economies tighten emissions standards and introduce carbon pricing mechanisms, India’s ability to execute this transition will shape its position in global manufacturing and its credibility in international climate commitments.

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