Trade Watch Quarterly Report

NITI Aayog’s Trade Watch Quarterly Report highlights the challenges being faced by the Indian economy. India achieved limited success in harnessing the China Plus One strategy. While countries like Vietnam, Thailand, Cambodia, and Malaysia have emerged as major beneficiaries. These countries have simplified tax laws, cheap labor, lower tariffs, and showcased proactiveness in signing the Free Trade Agreements (FTA).

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About Trade Watch Quarterly Report

India’s share in global trade has fallen for labor-intensive sectors, impacting her export competitiveness.

There has been a re-emergence of trade conflict between the US and China, reflected in the trade restrictions imposed by both countries.

This has led to the fragmentation of global supply chains, offering opportunities for a potential economic boom for India.

Indian economy is likely to be adversely affected by the European Union’s Carbon Border Adjustment Mechanism (CBAM), especially the steel sector, which represents 23.5% of India’s EU exports.

China Plus One Strategy

It is a global business strategy in which companies diversify their supply by adding alternative countries to China as part of their global operations.

The idea is to reduce over-reliance on China for manufacturing and sourcing goods, considering risks such as trade tensions, political instability, or supply chain disruptions.

Free Trade Agreement (FTA):

It is a pact between two or more nations to reduce barriers to imports and exports among them.

Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

The concept of free trade is the opposite of trade protectionism or economic isolationism.

European Union’s Carbon Border Adjustment Mechanism (CBAM)

CBAM is part of the “Fit for 55 in 2030 package”, which is the EU’s plan to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels in line with the European Climate Law.

The CBAM is a policy tool aimed at reducing Carbon Emissions by ensuring that imported goods are subject to the same carbon costs as products produced within the EU.

Impact India’s Export:

It will have an adverse impact on India’s exports of metals such as Iron, Steel and aluminum products to the EU, because these will face extra scrutiny under the mechanism.

India’s major exports to the EU, such as iron ore and steel, face a significant threat due to the carbon levies ranging from 19.8% to 52.7%.

From 1st January 2026, the EU will start collecting the carbon tax on each consignment of steel, aluminum, cement, fertilizer, hydrogen, and electricity.

1. With reference to the “China Plus One Strategy,” consider the following statements:

It is a global strategy aimed at reducing over-reliance on China for manufacturing.
India has been the most successful in harnessing this strategy compared to Southeast Asian countries.
The strategy is driven by factors like trade tensions, political instability, and supply chain disruptions in China.

Which of the statements is/are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(d) 1, 2, and 3

2. Which of the following sectors in India is likely to be most affected by the European Union’s Carbon Border Adjustment Mechanism (CBAM)?

(a) Textiles

(b) Pharmaceuticals

(d) Agriculture