Indian small and medium enterprises are struggling to maintain export competitiveness despite new free trade agreements. While tariffs are lowering, strict non-tariff barriers like the EU's Carbon Border Adjustment Mechanism (CBAM) are increasing operational costs and complicating market access for high-carbon goods. Many MSMEs lack the capital and technical expertise to implement required carbon reporting and sustainable sourcing. This compliance gap is leading to higher borrowing costs as banks integrate ESG risks into their lending criteria, threatening the viability of textiles and engineering exports.
