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Sitharaman Asks Indian Exporters To Brace For Climate Action Tax By Other Countries

Countries vying to transition to "greener" alternatives will fund that shift by raising tariff rates, says Sitharaman.

<div class="paragraphs"><p>(Source: Nirmala Sitharaman's official Instagram account)</p></div>
(Source: Nirmala Sitharaman's official Instagram account)

Finance Minister Nirmala Sitharaman cautioned Indian industries to brace for a climate action tax on Indian exports such as steel as countries adjust their policies.

Countries vying to transition to "greener" production alternatives will fund that shift by raising tariff rates against nations like India whose export basket includes production materials like steel, the minister explained.

Sitharaman's caution underscores India's concerns about how global efforts to mitigate climate may end up punishing developing nations. At the recent COP27, India and other developing peers like Brazil had opposed border tariffs proposed by the European Union on carbon-intensive products including cement and steel.

Sitharaman offered policy-level support to industries to help them scale their sectors to be greener. "We are doing everything we can in our country to adapt to renewable energy, but it will come at additional costs... The industry should be seized on these costs

She also asked industry to tell the government how climate change is affecting them and how India can adjust to climate change adjustments made by other countries that have an adverse cost impact on India.

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Ahead of Budget 2023, the finance minister also hinted that it's likely to pursue a growth agenda. The new budget will follow the spirit of earlier budgets and take it further for the next 25 years, she said while speaking at Ficci's 95th Annual Convention and AGM.

Growth Potential

Sitharaman said India's position is one of strength amid global uncertainties and a likely long-drawn recession. "It is a reality that we see a global reset happening... not just in terms of sourcing but also in terms of uncertainties constraining our supply chain," she said.

Citing a World Economic Forum report, she noted that India will add 140 million middle-income households and 14 million high-net-worth individual households to its economy by 2030.

"India's Amritkal is waiting for you to optimally utilize it...this is directly linked to demand generation" Sitharaman told the industry.

The government has provided a robust framework for technology use that gives the opportunity to those who want to commercially exploit it without having to do research and development or invest in it.
Nirmala Sitharaman, India's Union Finance Minister

The minister also spoke on the government's work on the technology stack—Aadhaar and UPI—adding, "India has shown the lead thanks to the government's favourable approach to technology and technology platforms as a public good."

"The government has provided a leapfrogging advantage for trading and manufacturing communities at no additional cost or infrastructure... The industry technology interface needs to be more robust, active, and real-time," she said.

India's willingness to share its technological stack for international benefit is also one of the themes of India's G20 Presidency.

Speaking on the Indian industry's potential, she sees the recession and the global supply and sourcing shifting to India's advantage. The focus, she said, was also on manufacturing, newer areas of service, and utilising the high energy of startups.