India is going through a stage of great concern for its economy, as the European Union (EU) is about to start collecting tariffs under its Carbon Border Adjustment Mechanism (CBAM) from January 2026. According to the report of the think tank GTRI, almost all the Indian exporters are not prepared for this, particularly in the case of steel and aluminum, and a large number of them still have no idea about emission reporting, the procedures for verification, and the setting up of compliance infrastructure. It is important to mention that even before the tariff takes effect, mandatory emissions data have already been implemented in trade, and last fiscal year’s exports fell markedly, while the steel exports to the EU experienced a particularly steep decline.
The downtrend of exports is not cheap: Indian manufacturers will be hit hard by elevated production costs. Without sufficient measures in place—such as a smoothly run domestic carbon pricing and credit trading system — companies might find it necessary to take on the entire CBAM levy, which will put them at a disadvantage in the European market. MSMEs (micro, small, and medium enterprises) are more affected because they have less money to spend.
The downside of the economy is quite substantial. That is, industries would be at the risk of losing billions of dollars of revenues that could have come from trade if under CBAM, said trade escalates without the support of a government policy. For example, there will be a need for the rapid mobilization of funds to be invested in the upgrading of compliance systems and the improvement of reporting and verification capabilities, which, at the same time, will require subsidies or incentives to decarbonize the production process and/or negotiation of transition periods or decreases in CBAM liabilities. The consequence of not moving quickly could be the compounding of export shrinkage, causing stiff trade relations with the EU, and lowering India’s portion of the carbon-intensive markets.
 starting in 2026. Weak compliance, rising costs, and lack of carbon pricing threaten steel and aluminum exports, putting billions in revenue at risk.){kind=link}