India's $37 Bn Worth Exports At Risk

India's export landscape faces a significant threat as the European Union (EU) and the United States roll out stringent non-tariff measures (NTMs). The Council on Energy, Environment and Water (CEEW) has sounded the alarm, warning that these measures, including the Carbon Border Adjustment Mechanism (CBAM) in the EU and the Inflation Reduction Act in the US, are likely to impact approximately 43 per cent of India's exports to the EU, valued at around USD 37 billion as of 2022.

CEEW's recent report, titled 'Sustainability-driven Non-tariff Measures: Assessing Risks to India's Foreign Trade,' sheds light on the escalating challenges faced by Indian exporters. It reveals that products in key categories, such as textiles, chemicals, selected consumer electronics, plastics and vehicles, which collectively accounted for 32 per cent of India's exports to the EU last year, are most vulnerable to these new regulations.

The rise of non-tariff measures is a global trend, with developed countries gradually reducing traditional tariff levels while concurrently increasing the issuance of NTMs. These measures encompass a wide range of policy actions, including environmental and sustainability-focused regulations. For India, compliance with these complex measures is complicated by regulatory disparities between trading partners, often leading to market access restrictions.

CEEW proposes a structured approach to address these challenges and safeguard India's exports. Firstly, the think tank suggests negotiating trade pacts that would establish mutual recognition of compliance assessment activities, making it easier for Indian businesses to navigate international regulations. Secondly, creating a common information-sharing platform for firms to register and track compliance-related data could streamline the process.

Furthermore, CEEW recommends that India develop its own standards and non-tariff measures to ensure product quality and compliance with international standards when necessary. This proactive approach would not only protect Indian exports but also position the country as a proactive player in the evolving global trade landscape.

The report highlights the increasing prevalence of sustainability-driven NTMs, which accounted for 19 per cent of total NTM notifications to the World Trade Organization (WTO) in 2021, up from eight per cent in 1997. In the past, NTMs imposed by the EU have already impacted Indian exports, notably in the rice and chemical sectors.