On July 24, 2025, India and the United Kingdom signed the Comprehensive Economic and Trade Agreement (CETA)—a landmark deal aimed at strengthening their economic partnership. This agreement comes after years of negotiations and marks one of India’s most ambitious trade pacts with a developed country.

• CETA covers a wide range of sectors, including trade in goods and services, digital trade, investment, labour mobility, and innovation. It removes tariffs on nearly 99% of India’s exports to the UK, offering major benefits for industries like agriculture, textiles, pharmaceuticals, electronics, marine products, and engineering goods. It also improves access for Indian professionals, simplifies visa rules, and supports women entrepreneurs and small businesses.
• The agreement is expected to boost exports, create jobs, attract investment, and help both countries work more closely in global value chains. It reflects India’s shift towards more comprehensive and inclusive trade agreements that go beyond just tariffs.

Key Highlights of CETA:

Tariff Elimination and Market Access

·         India will get duty-free access on 99% of its exports to the UK, including nearly 100% of trade value.

·         UK import duties—ranging up to 20% on key Indian exports—will be eliminated across a wide range of sectors.

·         Sectors like marine products, textiles, chemicals, base metals, and processed foods will benefit significantly.

Sector-wise Benefits

Agriculture and Processed Food

·         Duty-free access for fruits, vegetables, turmeric, pepper, cardamom, mango pulp, pickles, pulses, and ready-to-eat food.

·         Over 95% of agri and processed food tariff lines will attract zero duty.

·         Expected 20% increase in agri exports over the next three years.

·         New opportunities for jackfruit, millets, and organic herbs.

·         No tariff concessions on sensitive products like dairy, apples, oats, and edible oils.

·         States like Maharashtra, Gujarat, Punjab, Haryana, Kerala, and the Northeast stand to benefit.

Marine Sector

·         UK tariffs on shrimp, tuna, fishmeal, and feeds (previously 4.2–8.5%) to be eliminated.

·         India’s share in the UK’s USD 5.4 billion marine import market is currently just 2.25%—providing room for rapid growth.

·         Enhanced earnings for coastal fisherfolk through better price realisation.

·         Simplified Sanitary and Phytosanitary (SPS) standards reduce rejection risks.

Plantation Sector

·         Duty-free access for tea, coffee, and spices.

·         Boost for instant coffee exports, allowing competition with European exporters like Germany and Spain.

Textiles and Clothing

·         Tariffs eliminated on 1,143 product lines.

·         India’s current exports to UK are USD 1.79 billion, despite global exports of USD 36.71 billion.

·         Sectors like RMG (ready-made garments), home textiles, carpets, and handicrafts to benefit.

·         Expected 5% increase in UK market share within 1–2 years.

Engineering and Auto Components

·         Tariffs (previously up to 18%) to be removed on engineering goods.

·         India’s exports may double to USD 7.5 billion by 2030.

·         Growth in products like electric machinery, auto parts, construction equipment, etc.

Electronics and Software

·         Duty-free access for smartphones, inverters, optical fibre cables.

·         Software and IT-enabled services expected to grow by 15–20% annually from a base of USD 32 billion in 2024–25.

Pharmaceuticals and Medical Devices

·         UK tariffs eliminated on generics and medical devices.

·         Exports of surgical tools, diagnostic equipment, ECG and X-Ray machines to become more competitive.

·         India's current pharma exports to UK are under USD 1 billion, with major growth potential.

Chemicals and Plastics

·         Expected 30–40% increase in chemical exports to the UK.

·         Plastics exports to grow by 15%, with a target of USD 186.97 million by 2030.

·         Products include films, pipes, packaging, kitchenware.

Gems, Jewellery and Leather

·         Current G&J exports to UK: USD 941 million; FTA expected to double exports within 2–3 years.

·         UK jewellery imports stand at USD 3 billion, offering vast market potential.

·         Leather and footwear tariffs reduced from 16% to zero.

·         MSMEs in hubs like Agra, Kanpur, Kolhapur, and Chennai to benefit.

Sports Goods and Toys

·         Duty-free access for soccer balls, cricket gear, rugby balls, non-electronic toys.

·         Improved competitiveness against suppliers from China and Vietnam.

Liberalisation of Services and Mobility

·         Greater access for IT, legal, financial, educational, and professional services.

·         Simplified visa categories for:

o    Contractual Service Suppliers

o    Independent Professionals like yoga teachers, chefs, musicians

·         Double Contribution Convention: Indian professionals and employers exempt from UK social security payments for up to 3 years.

Other Important Apsects: 

Opening India’s Government Procurement

For the first time (outside the UAE), India has opened parts of its government procurement market to foreign participation. UK companies will be treated as Class 2 suppliers, provided at least 20% of their product value originates in the UK.

This move could lead to:

• Enhanced competition and procurement efficiency
• Improved technology and service standards
• However, it also raises concerns about its potential impact on the Make in India initiative

A calibrated approach is essential—sensitive sectors must be protected while ensuring transparent participation.

Progressive Inclusion: Gender and Development

This FTA includes India’s first dedicated chapter on gender, reflecting a more inclusive trade policy. The focus is on:

• Supporting women entrepreneurs
• Enhancing their participation in global value chains
• Promoting gender-responsive trade policies

This opens the door for joint data collection and policymaking aimed at improving women’s economic participation in bilateral trade. Implementation will be key to ensuring meaningful outcomes.

About Carbon Border Adjustment Mechanism (CBAM)

One important gap in the agreement is the lack of provisions to address CBAM, especially as the EU begins applying carbon tariffs on imports. This may expose Indian exports of carbon-intensive goods like steel and aluminium to extra levies, potentially eroding some of the tariff benefits granted under the FTA.

A forward-looking strategy would include:

• Technology-sharing arrangements
• Support for carbon-neutral manufacturing
• Green transition financing mechanisms

What Are Free Trade Agreements (FTAs)?

Free Trade Agreements are arrangements between two or more countries to reduce or eliminate tariffs and non-tariff barriers on substantial trade volumes. They may cover:

·         Trade in goods and services

·         Investment rules

·         Intellectual property

·         Digital economy, labour mobility, and standards

FTAs are an exception to the WTO’s Most Favoured Nation principle and can begin with an Early Harvest Scheme, which targets a limited set of products/services before a full FTA is signed.

India and Free Trade Agreements:

·         India has signed 13 FTAs in the last five years, including with Mauritius, UAE, and Australia.

·         However, trade outcomes have been mixed.

o    Exports to FTA partners rose 31%, but imports surged 82% (2017–2022).

o    FTA utilisation rate in India remains low—just 25%, compared to 70–80% in developed nations.

o    Non-tariff barriers, certification rules, and unfair competition from partner countries have been key hurdles.

Despite these challenges, FTAs can still deliver value through technology transfer, investment flows, and integration into global value chains, especially if structured carefully.

Conclusion:

The India–UK FTA represents a significant shift in India’s trade policy. It goes beyond tariff reduction to include deeper cooperation on investment, sustainability, gender, and worker mobility. It also indicates India’s willingness to engage with complex global trade norms and adopt a more balanced, development-oriented approach.

However, the success of this agreement will depend on its implementation, legal clarity, and the institutional structures created to monitor progress. With transparent processes and timely reviews, this agreement could serve as a template for India’s future FTAs, blending economic pragmatism with progressive values.