Carbon Border Adjustment Mechanism

IN THE NEW WORLD ORDER, ECONOMIC POLICY IS ALSO FOREIGN POLICY

Globalization is shifting from efficiency to security-led geoeconomics, where trade and finance serve strategic goals. Trends like SWIFT weaponization, friend-shoring, and tech restrictions define this new order. For India, China+1 and PLIs offer gains, but CBAM pressures and tech gaps persist, requiring tight alignment of economic reforms with foreign policy.

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India–EU FTA: opportunities, challenges and strategic significance

The India - EU Free Trade Agreement is a landmark trade pact between India and the European Union that aims to deepen economic ties through extensive tariff reductions, expanded services access, and improved investment flows. The EU will provide preferential access covering nearly all of India’s export value, benefiting labour-intensive sectors such as textiles, leather, and marine products, while also opening opportunities in IT and professional services. At the same time, India will gradually lower tariffs on a large share of EU goods with safeguards for sensitive sectors. However, strict EU regulatory standards, sustainability norms, and carbon-related measures remain key challenges that could limit gains unless Indian industries upgrade compliance capacity. Overall, the agreement strengthens India’s integration with a major global market while requiring domestic reforms to fully realize its benefits.

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CARBON BORDER ADJUSTMENT MECHANISM (CBAM) IMPACT ON INDIA: CHALLENGES & OPPORTUNITIES

The EU’s CBAM from January 2026 will tax carbon-intensive Indian exports, citing carbon leakage. India sees it as protectionist and against CBDR, hurting MSMEs. India plans a WTO challenge while building a domestic carbon market to retain revenue and drive its green transition.

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