A day after signing the historic India–UK Free Trade Agreement (FTA) in London, Commerce and Industry Minister Piyush Goyal firmly stated that India is “not afraid” of the Carbon Border Adjustment Mechanism (CBAM) proposed by the United Kingdom. The remarks came during a press briefing on July 26, 2025, as concerns mounted over the potential impact of the carbon tax on Indian exports.
Strategic Response to Non-Tariff Barriers
Goyal emphasized that India will respond “appropriately” to any non-tariff barriers, including CBAM, which is scheduled to be implemented by the UK in 2027. “Carbon tax is getting postponed repeatedly—even the European Union hasn’t implemented it yet. India is not weak. We will respond suitably if such levies affect our trade,” he said.
Although the CBAM was discussed during FTA negotiations, it was not included in the final agreement due to the UK’s delay in formal notification. However, both sides have reached a diplomatic understanding that India retains the right to rebalance trade benefits if CBAM undermines its export advantages.
Potential Impact and Safeguards
According to estimates by the Global Trade Research Initiative (GTRI), CBAM could affect $775 million worth of Indian exports to the UK, particularly in sectors such as iron and steel, aluminium, fertilizers, and cement. These sectors had just secured full tariff elimination under the FTA, making the proposed carbon tax a potential reversal of gains.
Goyal noted that the EU’s industry is more concerned about CBAM than India’s, citing increased costs for European exports and manufacturing. He reiterated that India has protected sensitive sectors—including dairy, rice, and sugar—in the FTA, and will not hesitate to take counterbalancing measures if future policies threaten its trade interests.
Broader Trade Context
The India–UK FTA, signed on July 24, 2025, allows 99% of Indian exports to enter the UK duty-free, and is expected to double bilateral trade to $120 billion by 2030. The agreement is hailed as a “game-changer” for sectors such as textiles, footwear, pharmaceuticals, and GI-tagged products like Kolhapuri chappals.
While the UK Parliament’s approval is pending, Indian officials remain optimistic about the deal’s long-term benefits. Goyal’s assertive stance on CBAM signals India’s readiness to defend its economic interests in an evolving global trade landscape.
