Economic Survey 2025: EU's Green Trade Curbs Are Trade Restrictions In Disguise, Says CEA

India’s external sector continued to display resilience amidst global headwinds, said the chief economic advisor adding that focus should be on reducing trade-related costs and enhancing export facilitation.

India faces the twin challenge of achieving higher levels of economic development and dealing with climate change, V Anantha Nageswaran said in the economic survey. "...it is hard to shake off the conclusion that both Carbon Border Adjustment Mechanism (CBAM) and EU Deforestation Regulation (EUDR) are trade protection measures garbed in the language of climate and environment," it said.

The CBAM and EUDR are expected to affect $9.5 billion of India’s exports to the EU, it said. EUDR is a law that aims to reduce deforestation in the European Union while CBAM is a carbon tariff on imported goods. 

India’s exports like coffee, leather hide and skin preparations, oil cake, paper, paperboard, and wood furniture could be highly impacted by EUDR.

Evolving trade stance of a few major economies could affect key Indian export sectors such as chemicals, machinery, textiles, and electronics, Nageswaran said.

"In the short term, diversifying export markets is essential, while medium-term efforts should focus on increasing market share," the statement said. Over the long term, India must position itself as a strategic partner in high-value sectors like biotechnology and semiconductors.

The Economic Survey comments on the exports follow US President Donald Trump's increasing calls for higher tariffs and characterisation of India, Brazil, and China as high-tariff countries.

NDTV Profit earlier reported that India will likely slash customs duty on several high-end imported goods from the US in the upcoming Budget. Sources had told us that the Narendra Modi government was likely to cut the customs duty on seven to eight high-end imported goods.

Trump has vowed to use punitive tariffs as means to pursue trade parity and geopolitical goals, even against US allies. The new administration has been discussing ways to punish allies who seek to engage in bilateral trade in currencies other than the dollar, Bloomberg had reported last month.

Earlier in the day, Trump reiterated his "100% tariffs" threat to BRICS countries over any planned common currency to counter the dollar. The US president has also raised the possibility of raising tariffs to imports from the European Union.

Amidst increasing participation of mom-and-pop investors in the US stock market, India's chief economic advisor warned of a likely correction coming for the world's biggest stock market.

If such a correction were to occur, the domino effect would spill on India's retail investors, Nageswaran said in the economic survey. "Elevated valuations and optimistic market sentiments in the US raise the likelihood of a meaningful market correction in 2025," the statement said.

The correction could have a cascading effect on India, especially given the increased participation of young, relatively new retail investors, it said. "Many post-pandemic investors have never witnessed a significant and prolonged market correction."