India–EU Trade Growth Could Amplify Environmental Degradation Risks

India and the European Union formally concluded the long-pending India–EU Free Trade Agreement (FTA) after nearly two decades of negotiations, a milestone hailed by political leaders for expanding bilateral commerce and employment opportunities. The pact is set to progressively eliminate tariffs on a wide range of goods over the next five to seven years, creating tariff-free access for Indian products across the vast EU market.

However, sustainability experts warn that this economic optimism risks sidelining environmental concerns. Sectors expected to gain the most - including textiles and garments, leather, chemicals, rubber, plastics, base metals, and gems and jewellery - are among India’s most environmentally intensive industries, consuming large volumes of water and generating pollution that local regulatory bodies have struggled to control.

Environmental stress is already evident in cases like the Yamuna River near Delhi, which experiences severe toxic contamination, frothing, and critically low dissolved oxygen levels, especially in winter months.

Monitoring authorities repeatedly cite untreated industrial discharge and sewage as major contributors, underscoring persistent enforcement gaps despite existing laws.

Similar pollution patterns are documented along other major rivers, including sections of the Ganga, Jojari, Noyyal, Palar, and Tapi, particularly near industrial hubs that are poised to grow under the FTA framework.

The deal’s environmental blind spots extend beyond water pollution. While the EU’s Carbon Border Adjustment Mechanism (CBAM) will price carbon emissions for products like steel, aluminum, and cement, many of the fastest-growing export sectors (e.g., textiles and leather) fall outside its scope.

This regulatory gap means that harmful environmental externalities - such as aquatic contamination and toxic waste - remain largely unpriced and unregulated, potentially amplifying environmental degradation unless Indian governance and compliance systems are strengthened in parallel with trade expansion.

Trade-growth-linked environmental risk is exactly what CBAM, EUDR and CSDDD are designed to address, and it changes what Indian exporters need to build to sustain EU market access as those frameworks tighten. Our supply-chain-and-operations and ESG-strategy teams help clients evaluate what these frameworks mean for sourcing, disclosure and market access.