“Trade agreements are not merely about the exchange of goods they are the architecture of geopolitics, development, and aspiration.”
On July 24, 2025, India and the United Kingdom formalized the Comprehensive Economic and Trade Agreement (CETA), a landmark pact that redefines their economic relationship. For the UK, CETA is its most significant bilateral agreement post-Brexit, while for India, it marks the first comprehensive free trade agreement (FTA) with a developed economy, breaking new ground beyond its traditional engagements with emerging markets. As the world’s fourth and sixth largest economies, the convergence of India’s demographic dynamism and the UK’s technological prowess underscores the geopolitical and economic weight of this deal. This article critically examines CETA’s contours, analyzing sectoral opportunities, regulatory complexities, and institutional challenges that will shape its implementation and long-term impact.
Existing Trade Patterns and Composition
Before delving into CETA’s provisions and their impact, it is essential to understand the current dynamics of India-UK trade.
India is the second-largest foreign investor in the UK, while the UK ranks 18th among India’s trading partners and is the third-largest investor in India after Mauritius and Singapore. The data shows a consistent increase in trade volumes: India’s total exports to the UK (goods and services combined) have grown from approximately $16 billion in 2018 to over $24 billion in 2025, despite pandemic-related disruptions. While imports have also grown, the expansion has been relatively moderate. India’s strength in services, particularly IT, legal, and consulting continues to anchor the bilateral trade surplus. Yet, bilateral trade accounts for less than 2.5% of India’s total global trade volume, indicating substantial untapped potential.
The current bilateral trade stands at approximately USD 56 billion. In 2024–25, India’s exports to the UK rose by 12.6% to USD 14.5 billion, while imports from the UK increased by 2.3% to USD 8.6 billion. The trade balance remains in India’s favor. Overall bilateral trade in 2023–24 reached USD 21.34 billion, up from USD 20.36 billion in 2022–23.
Petroleum products, telecom instruments, and electrical machinery and equipment occupied the top three slots in India’s exports to the UK in 2023–24, with petroleum products alone accounting for 10.28% of total exports. On the import side, silver, iron and steel, and electrical machinery dominate, with silver alone constituting 23.66% of total imports from the UK.
Given this backdrop, the signing of CETA is both timely and strategic. From India’s perspective, it is a balanced agreement that addresses critical priorities in the current global economic context. It includes the services sector, where India holds a comparative advantage, and comprehensively covers India’s export volume across tariff lines. Labour-intensive sectors which are vital for job creation have received focused attention, while sensitive sectors are adequately protected. Instruments like quotas on UK automobile imports have been used judiciously. In this respect, CETA can serve as a blueprint for India’s future trade negotiations with other developed economies such as the US and the EU.
CETA in the Context of India’s FTA Trajectory
India’s engagement with FTAs has historically been cautious, often yielding limited gains due to asymmetric trade complementarity and market access barriers. Agreements with ASEAN, Japan, South Korea, and Sri Lanka have faced challenges, including stringent rules-of-origin requirements, non-tariff barriers (NTBs), and competition from Chinese intermediates, as noted in studies by the Ministry of Commerce and think tanks like RIS and ICRIER. CETA marks a departure from this pattern. The UK’s mature, high-income market aligns closely with India’s comparative advantages in services, pharmaceuticals, textiles, and agribusiness. Unlike the export-saturated economies of Asia, the UK’s consumption-driven and services-intensive demand profile offers greater absorption capacity for Indian exports, positioning CETA as a strategic pivot in India’s trade policy.
Key Features of CETA: Tariff Reductions and Beyond
CETA is a deep and comprehensive agreement covering over 11,500 tariff lines, with 90–99% of goods subject to phased liberalization. It includes dedicated chapters on intellectual property rights (IPR), labor mobility, e-commerce, and government procurement. The UK will eliminate tariffs on 99.6% of Indian exports within seven years, encompassing nearly India’s entire trade basket, including textiles, leather, marine products, gems and jewelry, toys, chemicals, engineering goods, and agricultural products. India, in turn, will reduce tariffs on 89.5% of UK tariff lines, covering 70% of imports by value, over a decade. A bilateral safeguard clause allows temporary tariff reintroduction to prevent market disruptions, while India has protected sensitive sectors such as dairy, cereals, millets, pulses, essential oils, apples, certain vegetables, gold, jewelry, and lab-grown diamonds.
The agreement simplifies rules of origin by allowing self-certified certificates, easing compliance for exporters. It also promotes labor mobility and services trade, a core strength of the Indian economy. CETA provides deeper market access for IT, financial services, education, and healthcare professionals, with clear entry rules for business visitors, contractual service suppliers, and independent professionals. Notably, up to 1,800 Indian chefs, yoga instructors, and classical musicians can work in the UK annually under these provisions. A contentious clause exempts Indian professionals temporarily seconded to the UK from National Insurance Contributions (NICs) for three years, mirrored reciprocally for British workers in India. While this facilitates services trade, a key demand of India’s IT sector but it has sparked criticism in the UK, with figures like Conservative leader Kemi Badenoch decrying it as creating a “two-tier tax system.”
Sectoral Impact: Winners and Strategic Gains
CETA unlocks significant opportunities for both economies by leveraging their complementary strengths. For India, the agreement enhances access to a premium UK market, particularly for labor-intensive and niche sectors. Agricultural and allied goods, such as tea, mangoes, grapes, spices, and marine products, stand to benefit from tariff eliminations, with duties of 4.5–8.5% reduced to zero. This is expected to boost exports by over 50% within three years, enabling Indian farmers to fetch higher prices. In textiles and apparel, the removal of tariffs (previously up to 12%) enhances competitiveness against countries like Bangladesh, Cambodia, and Pakistan, which already enjoy duty-free access. The Ministry of Commerce estimates an export boost of $1.35 billion annually, with high employment elasticity benefiting states like Tamil Nadu and West Bengal. The leather and footwear sector, facing duties of up to 16%, will see significant growth, with exports already exceeding $5 billion and poised for further expansion in MSME clusters like Agra, Kanpur, and Vellore. Pharmaceuticals, a cornerstone of India’s exports to Europe, will gain duty-free access to the UK, potentially expanding into the NHS supply chain, contingent on regulatory alignment. Marine products and agriculture, particularly shrimp and spices, will become more competitive, benefiting coastal states like Kerala and Andhra Pradesh.
For the UK, CETA opens India’s burgeoning market to its high-value sectors. Tariffs on Scotch whisky and gin, previously as high as 150%, will fall to 40% over a decade, targeting India’s aspirational urban consumers. In automobiles, quotas will reduce duties on high-end vehicles from over 100% to 10%, though India’s domestic auto industry remains cautious of potential market disruptions. Advanced manufacturing and medical devices will benefit from improved market access, provided India streamlines its regulatory framework and investment climate. These gains position the UK to capitalize on India’s growing consumer base and industrial demand.
Implementational Challenges
Despite its promise, CETA faces significant hurdles. The IPR chapter, aligned with WTO TRIPS Article 31(h), mandates “adequate remuneration” for patent holders, potentially limiting India’s ability to issue compulsory licenses during health emergencies. Public health advocates warn that evergreening (extending patent life through minor modifications) could delay generic drug production, undermining affordability. The UK’s forthcoming Carbon Border Adjustment Mechanism (CBAM) poses another challenge, taxing imports based on embedded carbon content. This could increase costs for India’s carbon-intensive exports like steel, aluminum, and cement, necessitating rapid decarbonization to maintain competitiveness. Administratively, India’s trade infrastructure, customs digitization, product standards, and mutual recognition agreements remains fragmented. Delays in dispute resolution and redressal mechanisms could hinder small and medium enterprises (SMEs) from fully capitalizing on CETA’s benefits.
A Template for India’s Global Trade Ambitions
CETA represents a watershed moment in India’s trade diplomacy, offering a blueprint for equitable and growth-oriented FTAs with developed economies. By balancing India’s offensive interests in services and manufacturing with defensive safeguards in sensitive sectors, it aligns India’s economic strategy with its developmental priorities. The agreement’s success, however, hinges on proactive measures to address its challenges. India must safeguard public health by securing explicit IPR flexibilities, countering evergreening, and preserving compulsory licensing options. To mitigate CBAM’s impact, investments in green manufacturing such as low-carbon steel and expanded carbon credit frameworks are critical. Supporting vulnerable sectors like autos and dairy through productivity-linked incentives and skill development will ensure resilience. Establishing a dedicated CETA Monitoring Cell, with representation from industry, labour, and academia, will streamline implementation, while mutual recognition agreements will ease services trade barriers.
Looking ahead, CETA positions India as a confident player in global value chains, capable of negotiating sophisticated agreements with the US, EU, and other developed markets. Its emphasis on services, labour mobility, and tariff liberalization offers a scalable model for future FTAs, provided India strengthens its institutional capacity and industrial competitiveness. By leveraging CETA’s framework, India can transform its trade policy into a catalyst for inclusive growth, reinforcing its role as a pivotal economic power in an interconnected world.
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