India-UK Trade Deal: Navigating Carbon Tax Challenges

The India-UK free trade agreement currently excludes Britain's carbon tax proposal. If imposed, India reserves the right to counteract its impact on exports. Despite the absence of CBAM in the agreement, India flagged it as a concern during negotiations. Economic experts warn of potential trade impacts.

The recently signed India-UK free trade agreement omits provisions regarding the UK's proposed carbon tax. If implemented, India could respond to its impact on domestic exports, according to sources familiar with the matter.

The UK plans to launch its Carbon Border Adjustment Mechanism (CBAM) in 2027, a move India had previously highlighted as a potential trade obstacle. The agreement, aimed at doubling bilateral trade to USD 56 billion by 2030, does not incorporate the tax issue since it hasn't been officially announced yet.

Economic think tank GTRI recently stated that without a CBAM exemption, India's export sectors could suffer. Products like iron, steel, aluminium, fertiliser, and cement may be affected, with an estimated USD 775 million at stake. India has raised the carbon tax as a trade barrier concern during negotiations.

(With inputs from agencies.)