India and the UK sign a Comprehensive Economic and Trade Agreement (CETA),  expected to strengthen economic ties and enhance cooperation in sectors like technology, investment, climate, defense, and migration.

• This agreement eliminates tariffs on 99% of goods traded, providing substantial market access and boosting trade between India and the U.K.
• The bilateral trade between the two countries stands at nearly USD 56 billion, with a joint goal to double this figure by 2030.

Highlights of the India-U.K. CETA

• 99% tariff elimination: The FTA will eliminate tariffs on nearly all trade lines(99%),covering nearly 100% of the trade value benefiting Indian exports such as agriculture, marine products, textiles, and engineering goods.
  • In key labour-intensive sectors, duties have been reduced to zero from previously up to 20 per cent on marine products, 12 per cent on textiles and clothing, 8 per cent on chemicals, and 10 per cent on base metals.
  • In the processed food sector, tariffs on 99.7 per cent of lines have been slashed from as high as 70 per cent to zero, offering a major boost for Indian exporters.
• Special Benefits for Sectors: Key sectors such as IT, services, and education will see enhanced access to U.K. markets, particularly benefiting Indian talent.
• Three-year exemption on social security contributions: As per Double Contribution Convention, Indian workers in the U.K. will benefit from a significant exemption, improving mobility and access to labor markets.
  • The DCC is a bilateral agreement that coordinates social security contributions between two countries, preventing double taxation.

1. Agricultural and Marine Sectors

• Agriculture: India gains duty-free access for several agricultural products, including fruits, vegetables, spices, and processed foods.  Over 95% of agricultural and processed food tariff lines will attract zero duty.
• Duty-free access is expected to increase agri exports by over 20 per cent in the next three years, contributing to India’s goal of USD 100 billion agri-exports by 2030.
  • States like Maharashtra (grapes, onions), Gujarat (groundnut, cotton), Punjab and Haryana (basmati rice), Kerala (spices), and NE states (horticulture) stand to benefit from the pact.
  • India is not giving any tariff concessions on sensitive sectors – dairy products, apples and oats, and edible oils.
  • Provisions related to Technical Barriers to Trade (TBT) will streamline certification, cutting down time and cost for exporters.
• Marine: Elimination of UK tariffs on marine products, especially shrimp, tuna fishmeal, and feed, will open new markets for Indian exports in the U.K.’s $5.4 billion marine import market.
  • India’s share remains at just 2.25 per cent, underscoring a significant untapped export opportunity. India’s fisheries sector, especially in Andhra Pradesh, Odisha, Kerala, and Tamil Nadu, will see expansion.
• New Market Opportunities: Emerging products like jackfruit, millets, and organic herbs will also have expanded market access in the U.K.

1. Textile, Engineering, and Electronics

• Textiles: Zero-duty market access for over 1,100 textile product categories, helping India compete with countries like Bangladesh and Pakistan.
  • Sectors poised for exponential growth include RMG (ready-made garments), Home Textiles, Carpets, and Handicrafts, where the removal of duties creates immediate and substantial competitive advantages.
  • India is expected to gain at least 5 per cent additional market share in the UK within 1 to 2 years.
  • In textiles and clothing, while the UK’s total imports (USD 26.95 billion) are lower than India’s global exports (USD 36.71 billion), India still supplies worth only USD 1.79 billion to the UK.
• Engineering: With tariff elimination (as high as 18 per cent) under the FTA, engineering exports to the UK could nearly double in the next five years, reaching over USD 7.5 billion by 2029-30.
  • India’s global exports are USD 77.79 billion, while the UK imports USD 193.52 billion worth of such products, yet only USD 4.28 billion comes from India, signalling strong potential for expansion.
• Electronics and Software: Zero-duty access is expected to boost exports in sectors like smartphones, optical fibers, and inverters set to strengthen India’s foothold in the UK market.
• Software and IT-enabled Services: For the first time, the UK has made ambitious services commitments, offering market access in IT, financial services, telecom, education, and more, creating high-value opportunities.
  • The agreement facilitates smoother entry for Indian professionals, such as architects, chefs, and yoga instructors, with simplified visa procedures.

1. Pharma and Chemicals

• Pharma: Zero tariff provisions for Indian generics in the U.K. market, making Indian pharmaceutical exports more competitive.
  • India exports USD 23.31 billion globally and the UK imports nearly USD 30 billion, but Indian pharma accounts for under USD 1 billion, indicating significant headroom for growth.
• Medical Equipment: The number of medical devices like surgical instruments, diagnostic equipment, ECG machines, X-Ray systems will not attract any duty.
• Chemicals: The FTA is expected to boost India’s chemical exports to the U.K. by 30-40%, opening up new avenues for growth.
  • In chemicals and allied products, India exports over USD 40.52 bn globally, against the UK’s imports of USD 35.11 billion, but captures only USD 843 million of that market, highlighting a potential to scale up.

1. Other Sectors and Innovation

• Plastics and Sports Goods: Duty-free access for plastics, films, sheets, pipes, packaging, tableware, and kitchenware, with a focus on enhancing India’s global competitiveness with the UK’s major import sources, such as Germany, China, the United States, the Netherlands, Belgium, and France.
  • Projected growth is 15 per cent, and the target for the next 5 years for the calendar year 2030 is USD 186.97 million.
• Sports goods/toys: Indian sports goods and toys will benefit from eliminating UK import duties, making them more price-competitive compared to countries like China or Vietnam, which do not have similar FTAs with the UK.
  • Exports of soccer balls, cricket gear, rugby balls, and non-electronic toys are set to increase.
• Gems and Jewellery: Tariff relaxations under the FTA are projected to double India’s gems and Jewellery exports to the UK within the next 2-3 years.
  • India’s total G&J exports to the UK are valued at USD 941 million, with USD 400 million coming from jewellery. The FTA opens up a huge market as the UK imports approximately USD 3 billion worth of jewellery annually.
• Leather: The FTA is projected to add 5 per cent UK market share within 1-2 years. Exports are expected to exceed USD 900 million.
  • From 16 per cent to zero, tariffs were eliminated on India’s leather and footwear, empowering India’s craftsmanship to walk tall worldwide.
  • MSMEs in hubs like Agra, Kanpur, Kolhapur, Chennai to benefit from tariff-free exports; GI protection; simplified standards.
• Innovation Chapter: The FTA includes provisions to support innovation and the trade of new technologies, fostering a dynamic environment for growth in emerging sectors.

Conclusion

The India-U.K. FTA is a landmark agreement that promises to enhance bilateral trade, boost economic growth, and create more jobs in both nations. It aligns with India’s ambitions to strengthen its global trade footprint while ensuring that sectors like agriculture, engineering, and IT benefit from improved market access.

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