ABSTRACT:
This paper looks at how the European Union's Carbon Border Adjustment Mechanism (CBAM) interacts with the ongoing talks for the India-EU Free Trade Agreement (FTA). It focuses on the challenges and opportunities this situation creates for India. The CBAM is part of the EU's "Fit for 55" climate initiative and places carbon costs on imports of energy-intensive products like steel, aluminium, and cement. While the FTA aims to improve global market access, lower tariffs, and increase investment flows, the CBAM could undermine these advantages by raising compliance costs for Indian exporters, especially in carbon-heavy industries and small and medium-sized enterprises (MSMEs). Using a qualitative research approach and analyzing secondary data like academic studies, policy reports, and trade statistics, the study explores the legal, political, and economic effects of CBAM on India's trade competitiveness. It shows how carbon-heavy sectors and MSMEs might be hit hard, struggling to meet strict reporting requirements due to limited financial and technical resources. Still, the FTA could provide India with strategic advantages, such as greater market access, technology transfers, and partnerships in clean energy. The findings highlight the need for India to adopt a balanced strategy. This includes negotiating for phased compliance and securing transitional support for vulnerable industries. The paper concludes that connecting trade goals with climate commitments and viewing CBAM as both a challenge and an opportunity for collaboration will help India safeguard its trade interests, improve competitiveness, and encourage sustainable growth in the context of global climate governance.