The article explores how India can navigate the evolving global trade landscape following the U.S. decision to impose steep reciprocal tariffs. With India facing some of the highest tariff rates – around 50% in key export sectors such as textiles, engineering goods, chemicals, and electronics. The authors analyze the direct and indirect impact on India’s economy.

On April 2, 2025, what is marked as the Liberation Day in the USA, President Donald J. Trump unveiled a new trade policy, imposing a blanket 10% tariff on all imports and additional reciprocal tariff on 180 countries including India, which was among the hardest hit, facing retaliatory tariffs of 26–27 percent, which later raised to 50%.

The Trump administration justified the moved to impose reciprocal tariffs by arguing that the US had long been exploited by the foreign countries through unfair trade practices.

Impact of US Tariffs on India’s Economy

Break-up of India’s Exports by Country, 2024 (USD Bn)

Source: Trademap

In 2024, India exported $81 billion worth of goods to the US which accounted for 20% of the total exports, making it one of the key trading partners for India. By comparison, the UAE which is the second largest export market for India accounted for just 8%.

Engineering goods, Gems & Jewellery, Chemicals, Textiles and Electrical goods are among the key commodities exported, together they made up $53.1 billion, accounting for about 60% of the India’s total shipment to the US.

With tariffs raising the consumer prices the demand for the final goods is expected to shrink as these goods tend to be highly elastic and thus particularly sensitive to price changes.

There will also be an Indirect impact from supply chain disruptions, which will further amplify the overall impact of the tariffs.

A decline in India’s participation in the global value chains (GVC) could make it less attractive to foreign investors and is likely to deter investment in the export-oriented sectors

Sector-wise Implications

Sectoral Breakdown of India’s Exports to the US, 2024 (USD Bn)

Source: Trademap

India exported $116.5 billion worth of engineering goods in FY25, making up 27% of the total exports. The US was the largest market with a 16%, more than twice that of the second largest at just 7%.

Infact among India’s top 9 export sectors by value, the US is the largest market for 7 sectors which underscores how heavily Indian exporters are dependent on the American market.

Tariff Competitiveness Across Sectors and Alternate Suppliers
Textiles

Source: PHDCCI Research Bureau Analysis

Chemicals: India primarily exports intermediate chemicals though much of this trade is in commoditized products with limited value addition

Electrical and Electronic Equipment: The sector remains heavily dependent on imported subcomponents, while Chinese manufacturers can absorb higher tariffs others are being squeezed between rising import costs and declining export competitiveness.

Source: PHDCCI Research Bureau Analysis

Engineering Goods: The sector is strongly export-dependent on the U.S. and B2B buyers are expected to shift toward suppliers from FTA partner countries.

Source: PHDCCI Research Bureau Analysis

Article of Steel: In addition to reciprocal tariffs steel imports are also subject to Section 232 duties which can exceed 50%.

Source: PHDCCI Research Bureau Analysis

Pharmaceutical Products: They are essential goods; their demand is inelastic and hardly changes with change in prices. The U.S. still depends heavily on India for these medicines and generic drugs are exempted from trade restrictions.

Source: PHDCCI Research Bureau Analysis

Indian Exporters can mitigate the impact of tariffs by:

1. Diversifying exports market by redirecting trade volumes from the US towards the emerging markets and leveraging on the recently concluded free trade agreement (FTA) with the UK, advancing talks with the EU and the reviving negotiations with the GCC
2. Prioritizing exports of value added and intermediate goods, particularly in areas where US demand is growing. These goods are generally subject to lower duties than finished goods, due to tariff-escalation patterns, which could help cushion the blow of tariff hikes
3. Lowering the costs of raw materials especially in labour and resource intensive sectors such as apparel, chemicals and electronics. This can be achieved by sourcing raw materials locally, reducing production waste, improving energy efficiency, investing in R&D and process technology and developing shared facilities

At the policy level the Indian government can respond by:

1. Negotiating product specific exemptions, by offering targeted deals such as zero for zero tariffs on steel and auto parts to shield the most vulnerable exports sectors. At the same time expanding production linked incentive could make India a more attractive destination for US manufacturers and bolster investment
2. Strengthening India’s role as a China+1 alternative, to attract Asian importers particularly from Vietnam or Philippines, offering them a way to sidestep higher regional tariffs they currently face
3. Shielding the robust services exports could help the country weather global trade tensions and prevent disruptions from spilling over into IT, GCCs and BPOs

India faces one of the highest tariff rates around 50% across multiple sectors which is likely to reduce demand for Indian goods in the US market. These products will become less competitive compared to domestically produced goods or imports from alternate suppliers such as Mexico, Bangladesh, and Vietnam. As a result, Indian exporters with significant exposure to the US will need to diversify their markets and focus on value added exports to maintain their global competitiveness

The post How India can Navigate Geo Political Situation on Import Tariffs appeared first on Avalon Consulting.

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She highlighted how carbon markets are rapidly evolving from compliance-driven systems like the EU ETS to the expanding voluntary market shaped by corporate net-zero commitments. The article explains India’s emerging carbon credit ecosystem, including the Indian Carbon Market (ICM) and the Carbon Credit Trading Scheme (CCTS), and outlines challenges such as verification gaps, regulatory clarity, and technological barriers. Ridhi emphasized that stronger regulation, cost-effective sustainability measures, and technology-enabled verification can accelerate participation, unlock green investments, and position carbon credits as a viable pathway for India’s long-term decarbonization journey.

Evolution of Carbon Credit Markets

The carbon credit market has taken a shift from voluntary offsets to regulated compliance schemes. Initially dominated by the Kyoto Protocol’s Clean Development Mechanism (CDM), it was caused to later expand through regional initiatives such as the EU Emissions Trading System. In recent years, corporate net-zero commitments have driven the adoption of voluntary carbon markets.

Carbon credits are now being reshaped in how they get issued, traded, along with retired. Technological innovations together with stricter verification standards accompany improved transparency in this reshaping.

Carbon Credits Market Overview

Compliance Market

Compliance markets are established and regulated by governments or supranational bodies to help achieve emissions reduction goals

Under compliance market, it follows Cap-and-Trade Principle where companies buy or sell emission allowances to stay within regulatory limits; exchanges trade carbon credits, along with regulators distribute those credits for ensuring compliance. The EU Emissions Trading System (EU ETS) is known as the largest carbon compliance market because it caps the total emissions. The system enables trading for allowances. Market volatility and regulatory complexity involve ensuring actual emission reductions.

Voluntary Market

The Voluntary Carbon Market (VCM) enables organizations or individuals to buy carbon credits from third-party offset programs to voluntarily compensate for their carbon emissions.

It involves Acquisition and Retirement where Credits are acquired through projects like reforestation and renewable energy and then retired to compensate the carbon emissions. Few challenges involve lack of standardization, verification difficulties, and maintaining credibility of offsets

India’s Carbon Credit Market

India is one of the fastest-growing economies in the world, and home to large-scale industries and businesses. With a national commitment to achieving net-zero emissions by 2070, carbon market mechanisms in India are projected to mobilize over $100 billion in green investments by 2030. The government has started the Indian Carbon Market (ICM), aiming to facilitate both compliance and voluntary carbon credit trading, prioritizing industries and sectors where emissions are difficult to decarbonize.

Corporates are actively engaging with carbon markets; large industrial players see carbon credit as a strategic tool for decarbonization and MSMEs are exploring them to minimize costs and generate additional revenue streams.

With growing international demand for credible carbon credits, especially from emerging markets, India is well-paced to emerge as a key global supplier.

India currently operates two market-based emission reduction schemes:

1. Perform, Achieve and Trade (PAT) scheme
2. Renewable Energy Certificates (REC) system

The Carbon Credit Trading Scheme (CCTS), 2023, which was launched under the Energy Conservation Act, is a recent policy initiative introduced to structure a more formal carbon market. The scheme reflects India’s ambition to position the carbon market among the top three globally by 2030. Achieving this will require not only rapid scale-up but also sustainable practice, clean energy integration, and robust mechanisms for emissions management.

However, certain gaps within CCTS require clarification, like more research is needed for CCTS to become fully functional for use and stakeholders must better articulate how they are able to participate as well as gain some benefit. Therefore, a more marketing-oriented perspective should be included to illustrate how organizations can help navigate this complex domain without overtly promoting any brand

Key Challenges in India’s Carbon Market

• Measurement and Verification: Nature-based projects encounter difficulties during verification of storage or carbon capture (e.g., afforestation projects in Madhya Pradesh)
• Balancing Supply and Demand: Oversupply could lead to price collapse, also weakening corporate interest or engagement
• Economic and Technological Barriers: Compared to the EU ETS, India faces a gap because of a lack of reliable measurement and verification tools
• Regulatory Oversight and Transparency: Projects may easily harm the environment, or they may violate the additionality standards because regulators have not sufficiently overseen them (e.g., Himachal hydropower projects)

Making the Carbon Market Work

To drive participation, sustainability efforts must not lead to significantly higher consumer costs. Instead, sustainability should be cost-effective and supported by clear regulations. Two tools are crucial:

1. Effective Regulation
2. Cost-Effective Sustainability

One practical application is using carbon credits to bridge the viability gap in projects sustainably. For instance, in one of the cases, renewable energy ventures in Southeast Asia have leveraged carbon trading to strengthen their financial feasibility, highlighting how markets can unlock profitability for sustainable initiatives while offering scalable models of emerging economies.

This approach not only demonstrated the potential profitability of green projects when supplemented with carbon credit but also highlighted a scalable model for other emerging market players.

Further, EPC (Engineering, Procurement, and Construction) players can make green technologies more viable by making their projects obtain green certification and carbon credits by evaluating decarbonization strategies. The process requires companies to do the following:

• Audit and Certification: Projects must be independently audited by third party auditors to validate emissions reductions to claim legitimate and valid carbon credits
• Carbon Registries: Entities like the Bureau of Energy Efficiency (BEE) as well as the Indian Carbon Registry ease credit issuance with ensuring compliance with emission standards also promote transparency. They can be necessary in validating such projects and listing those who qualify matters
• Institutional Frameworks: Initiatives like the National Indian Carbon Coalition collaborate alongside stakeholders, technically guide, and consistently oversee regulations to increase investor confidence

As India’s carbon market develops, institutions/businesses will need structured direction on carbon accounting, certification, and monetization options. To foster engagement and understanding, carbon market communications must go beyond high-level narratives and clearly outline the processes, tangible benefits, and required actions.

By demystifying these steps—such as how to get audited, register credits, and leverage institutional support, more businesses will be empowered to participate.

Future of Carbon Credit Markets in India

Looking ahead, India’s carbon market needs to develop into a well-structured and transparent system supported by strong regulations and broad stakeholder engagement, hence, the focus must be on:

• Simplifying measurement and verification processes through a unified national system.
• Introducing price stability mechanisms like floor prices.
• Technology Enablement and Leveraging AI to reduce emissions:
  • Monitoring: AI tracks emissions across operations
  • Prediction: AI forecasts emissions and helps set reduction targets
  • Reduction: Prescriptive AI enhances efficiency in operations
• Enhancing regulatory capacity and fostering skilled human capital in carbon verification to ensure transparency and create employment

If these measures are implemented, India’s carbon market can evolve into a functional, well-regulated ecosystem, supported by a clear process framework and guided stakeholder participation. By enabling sustainable practices along with economically viable and systematically guided, organizations and the country can meet its emissions goals without compromising growth.

The post Carbon Credits Landscape: Turning Green Goals into Viable Solutions appeared first on Avalon Consulting.