EU FTA Without CBAM, Steel Quota Relief May Slash India's Engineering Exports by 10%

• India's engineering exports to the EU could decline by 10% annually if Carbon Border Adjustment Mechanism (CBAM) and steel safeguard measures remain unresolved in the FTA.
• The EU was India's second-largest market for engineering goods in FY25, accounting for 17.1% of exports, which hit a record $116.7 billion.
• CBAM, effective January 1, 2026, imposes a 20-35% tax on select imports, with high default emission values potentially increasing costs by 400-500 euros per tonne.
• The EU's proposed steel quota reduction by 47% and doubled out-of-quota duty to 50% will further impact Indian steel exports.
• Indian exporters face higher tariffs and compliance costs due to renewed GSP suspension and delayed FTA implementation, making 2026 a challenging year.

Why It Matters: Unresolved CBAM and steel quotas in the EU FTA threaten a significant 10% drop in India's engineering exports.