India's crucial export sectors, particularly aluminum, iron, and steel, are facing mounting threats from climate change inaction that could severely impact their profitability and long-term survival, according to a recent analysis by global consulting firm Boston Consulting Group (BCG).
Severe Economic Consequences Looming
India ranks among the top 10 countries most affected by extreme weather events, as revealed by the 'Climate Risk Index 2026' presented at COP30. Sumit Gupta, BCG Managing Director and Senior Partner, Asia Pacific Leader for Climate & Sustainability, emphasized that the cost of climate inaction for India is too significant to ignore.
Citing data from the Reserve Bank of India and World Economic Forum, Gupta highlighted that up to 4.5% of India's GDP could be at significant risk of decline due to climate-induced extreme events by 2030. The projections become even more alarming toward the century's end, with climate-related issues potentially costing India between 6.4% and over 10% of its national income.
Export Industries Bear the Brunt
Anirban Mukherjee, BCG Managing Director and Partner, India Lead for Climate & Sustainability, explained that export-driven businesses in India, especially hard-to-abate sectors like aluminum, iron and steel, face immediate international regulatory shocks.
The European Union's Carbon Border Adjustment Mechanism (CBAM) is projected to affect approximately $7.7 billion worth of Indian exports to the EU, representing about 10-11% of India's total exports to the trading bloc. Mukherjee warned that climate inaction is increasingly exposing businesses to escalating risks that threaten profits, operations, and long-term viability.
BCG's global estimates indicate that direct climate risks alone could threaten between 5% and 25% of the 2050 EBITDA for businesses worldwide.
Corporate Awareness and MSME Vulnerability
Despite the grim outlook, there are signs of corporate recognition. According to Corporate Sustainability Assessment data, one-third of large Indian companies consider climate strategy among their top three material issues. These 187 India-based firms account for 85% of the country's market capitalization.
However, only about 40% of firms based in India currently perform physical risk assessments, indicating significant room for improvement in corporate climate preparedness.
The report also highlighted the particular vulnerability of Micro, Small and Medium Enterprises (MSMEs), which form the backbone of many supply chains. Most large companies in manufacturing, automotive, consumer goods, textiles, and construction source nearly 60-70% of their components or services from MSMEs. In the automotive sector specifically, approximately 70% of parts and sub-assemblies come from tier-2 and tier-3 MSMEs.
With MSMEs contributing about 45% of India's total export value, almost 20-30% of India's MSME exports could eventually face direct or indirect CBAM-related compliance or cost exposure, creating ripple effects throughout the economy.
The BCG experts concluded that while Indian companies recognize the seriousness of the climate challenge, urgent action is needed to mitigate the substantial risks to both corporate profitability and national economic stability.
