This study examines the role of carbon credit trading in promoting sustainable industrial development in India. Focusing on the period post – 2023, research explores the challenges and opportunities presented by carbon trading, particularly for small and medium-sized enterprises (SMEs). The research relies on secondary data from government reports, academic journals, and industry publications to assess the regulatory framework and financial incentives supporting carbon trading. Thematic analysis highlights key trends, while comparative analysis offers insights from both developed and developing nations. Findings indicate that carbon credit trading incentivizes cleaner industrial practices and fosters economic growth. However, SMEs face significant barriers, including high costs, limited market access, and complex regulations. The study underscores the importance of government regulations and financial incentives in facilitating participation in carbon markets, ultimately contributing to sustainable industrial development in India. These findings have implications for policymakers and industry leaders seeking to enhance the effectiveness of carbon trading as a tool for environmental sustainability.