Context:

The recent visit of the United Kingdom’s Prime Minister Keir Starmer to India has opened a new phase in India–UK relations. Accompanied by a strong delegation of over a hundred business leaders, cultural representatives, and university heads, Starmer’s visit underscored the growing importance of the Comprehensive Economic and Trade Agreement (CETA) — a landmark pact that seeks to deepen trade and investment between the two countries.

• • This visit comes at a critical time for India, which is facing external trade challenges such as the 50 per cent tariff imposition by the United States under President Donald Trump. The strengthening of economic ties with the UK thus serves not only as good diplomacy but also as smart economic strategy.

About the India–UK Comprehensive Economic and Trade Agreement (CETA):

• • The India–UK CETA is an ambitious and wide-ranging trade deal aimed at enhancing bilateral commerce, investment, and technology cooperation. The agreement covers over 99 per cent of tariff lines in both industrial and agricultural products — making it one of India’s most comprehensive trade pacts to date.
  • The CETA seeks to double bilateral trade in goods and services, which currently stands at $56 billion, to $120 billion by 2030. This includes around $23 billion in goods and $33 billion in services traded between the two nations. India currently enjoys a trade surplus with the UK in both categories, but there remains vast untapped potential for growth.

India–UK Trade at a Glance:

• • Bilateral trade (2024): $56 billion
  • India’s exports to the UK (goods): $12.9 billion
  • India’s exports to the UK (services): $19.8 billion
  • India’s imports from the UK: $8.4 billion in goods and $13 billion in services

While India’s share of the UK’s total imports remains modest — about 1.5% in goods and 4.6% in services — the potential for expansion is immense. The CETA provides the framework to unlock that potential.

Why the CETA Matters for India?

The UK is one of the world’s top importers, with total goods imports valued at $815 billion and services imports at $423 billion in 2024. Currently, the UK’s main import partners include China, the US, Germany, France, and Italy. For India, this creates an opportunity to expand its presence in sectors where it has existing capabilities but a limited market share.

• • Gems and Jewellery: The UK imported $92.8 billion worth of gems and jewellery in 2024, but India’s contribution was just $0.6 billion. Given India’s strong base in diamond cutting and jewellery exports, this sector represents a clear opportunity for diversification — especially when India faces uncertainty in the US market due to tariffs.
  • Textiles and Apparel: In 2023, the UK imported $22.3 billion worth of apparel and made-ups, while India’s exports accounted for only $1.59 billion. Before CETA, Indian apparel faced 9–12% tariffs, while competitors like Bangladesh and Vietnam enjoyed duty-free access. Under the new deal, Indian exporters will now be on par with these countries, removing a major cost disadvantage.
  • Leather and Footwear: The UK imported $8.5 billion worth of leather and footwear, with India’s share just $453 million. Earlier, India faced 8% import duty on footwear, while China and Vietnam faced even higher rates. With CETA reducing these duties, India’s competitive position will strengthen considerably.
  • Pharmaceuticals and Machinery: The UK’s imports of pharmaceuticals and machinery are dominated by the US, Germany, and China. CETA can open new channels for Indian firms in these high-value sectors, particularly for generic drugs, active pharmaceutical ingredients (APIs), and precision engineering goods.

How the UK Benefits?

The agreement is not one-sided. The UK also gains greater access to India’s large and growing market. One of the most visible outcomes of the deal is the phased reduction in India’s steep import duties on alcoholic beverages, particularly Scotch whisky and gin, from 150% to 75% immediately, and then to 40% over ten years.

Other areas of UK interest include:

• • Advanced machinery and defence equipment
  • Clean-energy technologies
  • Medical devices
  • Higher education and research collaborations

These sectors align closely with India’s domestic priorities of modernising its defence industry, transitioning to clean energy, and building human capital.

Key Outcomes of Keir Starmer’s Visit:

1.      High-Level Business Delegation: Over 100 entrepreneurs and industry leaders accompanied the UK Prime Minister, highlighting London’s renewed interest in India’s fast-growing economy.

2.      Investment Commitments: Around 64 Indian companies have pledged investments worth £1.3 billion in the UK, reinforcing mutual confidence in the bilateral relationship.

3.     Defence Cooperation: The visit also facilitated a £350 million missile supply deal, supporting India’s defence acquisitions and signalling stronger security cooperation.

4.     Cultural and Educational Partnerships: The iconic Yash Raj Films will shoot three major films in the UK, strengthening cultural ties. Additionally, two British universities are set to establish campuses in India, deepening educational collaboration.

India’s Domestic Challenges and Reforms:

While the CETA opens new markets, the real test lies in India’s ability to deliver competitively. Tariff reduction alone cannot ensure higher exports; domestic reforms are critical.

• • Trade Facilitation: India’s logistics and customs processes remain cumbersome. According to the World Bank Enterprise Survey, the average customs clearance time for exports in India is 17.3 days, compared to 6.7 days in Bangladesh and 3.3 days in China. Streamlining port operations, digitisation of paperwork, and better coordination between agencies can significantly reduce transaction costs.
  • Access to Finance: Small and medium enterprises — key players in labour-intensive sectors like textiles, gems, and footwear — often face difficulties in accessing affordable credit. Improving financial inclusion, simplifying collateral requirements, and expanding credit guarantee schemes can help these exporters scale up.
  • Regulatory Reforms: Economist Manish Sabharwal has described India’s complex compliance system as “regulatory cholesterol.” Simplifying business registration, labour laws, and tax compliance would encourage investment and boost productivity.
  • Industrial Clusters and Infrastructure: India needs to strengthen its manufacturing clusters by investing in common testing facilities, quality certification centres, and better logistics. Shared infrastructure reduces costs and enhances the reliability of Indian products in global markets.

Strategic Implications:

• • The CETA has a broader strategic dimension. As global trade realigns, India is seeking to diversify its export destinations. The deal with the UK sends a signal to both Washington and Brussels that India is capable of negotiating balanced, mutually beneficial trade pacts.
  • For India, the UK can serve as a gateway to Europe — especially as negotiations for an India–EU Free Trade Agreement continue. For the UK, post-Brexit realities make India an essential partner for access to large, emerging markets.

Way Forward:

1.       Faster Implementation: India should consider shortening tariff reduction timelines, particularly in sectors like beverages, to show commitment and attract goodwill.

2.      Focus on Competitiveness: Addressing structural bottlenecks in manufacturing and exports will ensure India truly benefits from lower tariffs.

3.      Leverage Services Trade: India’s strength in IT, digital services, and finance can be further harnessed through mutual recognition of professional qualifications and easier movement of skilled workers.

4.     Innovation and Collaboration: The education and research partnerships initiated under the Vision 2035 framework should be leveraged for co-innovation in clean energy, AI, and biotechnology.

Conclusion:

The visit of Prime Minister Keir Starmer marks a turning point in India–UK relations. The Comprehensive Economic and Trade Agreement represents a major step toward a deeper, more balanced partnership that goes beyond trade — encompassing investment, defence, technology, and education. For India, this is both an opportunity and a test. With structural reforms, better logistics, and policy support, India can turn the UK market into a strategic hedge against global trade volatility — and showcase its ability to engage the world on equal terms in a new era of economic diplomacy.