India, EU seal FTA with CBAM breather, Pg17

Key Highlights:

• India and the European Union (EU) have concluded negotiations for a Free Trade Agreement (FTA) to ensure regulatory certainty.
• The EU's Carbon Border Adjustment Mechanism (CBAM), which began implementation on January 1, 2026, imposes a carbon-related charge on imports from countries with lower environmental standards.
• India has sought easier access to steel scrap from the EU to mitigate the impact of CBAM on its steel industry.
• The EU Deforestation Regulation (EUDR), now scheduled for implementation in December 2026, is expected to impact India's agricultural exports to the EU, valued at $1.3 billion.

Detailed Insights:

• The India-EU FTA aims to address the EU's strict regulations that pose compliance challenges for Indian exporters, potentially reversing trade deal gains.
• CBAM will likely hurt India's exports of iron, steel, and aluminum products to the EU, with potential taxes ranging from 20-35% on select imports.
• The Indian government aims to increase the share of scrap in steel making to 50% by 2047 under the 'green steel initiative', utilizing electric arc furnace technology (AFT).
• The EUDR requires extensive compliance procedures, including supplier details and production addresses, posing challenges for Indian agricultural exports due to the prevalence of smallholder farmers.
• The EU Directive on Corporate Sustainability Due Diligence (CSDD), effective from 2027, will require companies to analyze their value chains for risks like human rights violations and environmental pollution, raising data security concerns for Indian manufacturers.

Key Concepts Involved:

• Free Trade Agreement (FTA): An agreement between two or more countries to reduce or eliminate trade barriers.
• Carbon Border Adjustment Mechanism (CBAM): A carbon tax on imports based on the carbon intensity of their production.
• EU Deforestation Regulation (EUDR): A regulation preventing products linked to deforestation from being sold in the EU.