Recently, India and the United Kingdom have signed the Comprehensive Economic and Trade Agreement (CETA), marking a historic milestone in their bilateral trade relations.

• Key objective of the agreement: To double bilateral trade between the two countries by 2030.

About CETA (Comprehensive Economic and Trade Agreement)

• It is a type of FTA that covers a wide range of economic cooperation, including goods, services, investment, and non-tariff barriers.

Key Highlights of the India-UK Comprehensive Economic and Trade Agreement

• Tariff Elimination & Market Access: 99% tariff elimination covering 100% trade value for Indian exports.
  • Sensitive sectors protected: Dairy, apples, oats, edible oils retain tariffs.
• Double Contribution Convention (DCC): 3-year exemption on UK social security contributions for Indian workers.
  • Prevents double taxation, enhances take-home pay & cost competitiveness.

Sector-Wise Potential Benefits

• Agriculture & Marine
  • Duty-free access for: Fruits, vegetables, spices, processed foods (95% agri-lines at 0% duty).
  • Key beneficiary states: Maharashtra (grapes, onions), Gujarat (groundnut, cotton).
    • Punjab/Haryana (basmati rice), Kerala (spices), NE states (horticulture). 
  • Marine sector: Shrimp, tuna, fishmeal gain 0% duty in the UK market.
    • Andhra, Odisha, Kerala, Tamilnadu  to expand fisheries exports (current share: 2.25%).
• Textiles, Engineering & Electronics
  • Textiles: 1,100+ categories at 0% duty (vs. 12% earlier).
    • RMG, home textiles, carpets to compete with Bangladesh/Pakistan.
    • Target: 5% UK market share gain (current exports: $1.79B of UK’s $26.95B imports).
  • Engineering: 0% duty (from 18%) to double exports to $7.5B by 2029-30.
  • Electronics/Software: Smartphones, optical fibers, inverters gain 0% duty.
  • IT/ITES: UK’s first ambitious services commitment (finance, telecom, education).
• Pharma & Chemicals
  • Pharma: 0% duty for generic drugs.
    • Medical devices (surgical tools, ECG machines) also duty-free.
  • Chemicals: Expected 30-40% export growth .
• Other Sectors
  • Plastics & Sports Goods: Films, pipes, packaging at 0% duty; target $187M by 2030.
    • Toys/sports gear (cricket, soccer balls) to compete with China/Vietnam. 
  • Gems & Jewellery: Tariff cuts to double exports in 2-3 years. 
  • Leather: 0% duty (from 16%) to boost exports.
    • MSME hubs (Agra, Kanpur, Chennai) benefit.
• Innovation & MSME Support: Promotes tech trade & R&D collaboration.
  • MSMEs:
    • GI protection (e.g., Kanpur leather, Agra footwear).
    • Simplified standards & digital portals for export guidance.

Key Drivers of CETA

• India’s Objectives: Gain duty-free access to the UK’s USD $46.3 billion agricultural market and USD 5.4 billion marine market.
  • Enhance services exports, particularly in IT/ITeS (India’s services exports to UK: £14.7 billion in 2024).
  • Facilitate professional mobility and exempt Indian workers from UK social security contributions via the Double Contribution Convention (DCC).
  • Protect sensitive sectors like dairy, edible oils, and milled rice.
• UK’s Objectives:
  • Access India’s growing market (1.4 billion population, rising middle class) for goods like whisky, automobiles, and salmon.
  • Attract Indian investment in the UK’s financial and technology sectors (e.g., FinTech, green energy).
  • Reduce tariffs on 90% of UK exports to India, covering 70% of trade value.
• Geopolitical Motivations
  • UK’s Post-Brexit Strategy: Post-Brexit economic recovery and high inflation (2022–23) pushed the UK to seek stable trade partners like India.
    • Post-Brexit, the UK sought to reduce reliance on the EU and China, prioritizing trade deals with fast-growing economies like India.
    • The CETA aligns with the UK’s Global Britain vision, enhancing its influence in the Indo-Pacific and countering China’s economic dominance.
  • India’s Global Trade Ambitions: India aims to boost exports to USD 2 trillion by 2030, with FTAs as a key driver.
    • The CETA complements India’s FTAs with Australia, UAE, and ongoing talks with the EU, positioning India as a global trade hub.
    • The CETA aligns with India’s Make in India, Atmanirbhar Bharat, and export promotion initiatives, boosting manufacturing and job creation.
  • Indo-Pacific Alignment: Both nations share interests in a free and open Indo-Pacific, countering regional security challenges and fostering technology and defense cooperation.

Pre-CETA Trade and Investment

• Trade Volume: Bilateral trade grew from USD 50.1 billion in 2021–22 to USD 56 billion in 2024–25, driven by India’s exports in engineering, textiles, and gems.
• Investment: UK is India’s 6th largest FDI source, with USD 35 billion invested till Sep 2024. India invested USD 19 billion in the UK.
  • There are 971 Indian companies operating in the UK employing over 1 lakh people.  There are 667 British companies in India employing over 5 lakh people.
• MSME Contribution: Indian MSMEs contribute 30.1% to GDP (2022–23) and 45.8% to exports (2024–25), making them a key focus for CETA’s inclusivity measures.

Significance of the India-UK CETA

• Economic Milestone:
  • Global Economic Positioning: As the world’s 6th (UK, GDP ~USD 3.9 trillion) and 4th (India, GDP ~USD 4.2 trillion) largest economies, the CETA strengthens bilateral economic ties, positioning both nations as key players in global trade.
  • India’s FTA Strategy: Marks India’s 16th Free Trade Agreement (FTA) and its most comprehensive with a G-7 nation, aligning with India’s goal to boost exports to USD 2 trillion by 2030 (from USD 776 billion in 2024–25).
• Trade Expansion:
  • Bilateral Trade Target: Aims to double bilateral trade by 2030, adding an estimated USD 34 billion annually to trade volumes.
  • Market Access: India gains zero-duty access on 99% of tariff lines, covering nearly 100% of trade value for exports to the UK.
    • UK secures tariff reductions on 90% of its tariff lines (70% of trade value) to India over 10 years.
• Strategic and Geopolitical Impacts
  • Strategic Partnership:
    • Indo-Pacific Alignment: Strengthens India-UK collaboration in the Indo-Pacific, supporting a free and open region amid geopolitical tensions (e.g., countering China’s influence).
    • Technology and Defense: Complements existing cooperation under the India-UK Roadmap 2030, fostering innovation in FinTech, green energy, and defense manufacturing.
    • Sources: The Hindu, The Week, Indian Express.
  • Inclusivity and Sustainability:
    • Promotes inclusive growth by empowering MSMEs, women entrepreneurs, farmers, fisherfolk, and youth, aligning with India’s Atmanirbhar Bharat and sustainable development goals.
    • Encourages sustainable practices through provisions on traditional knowledge in patents and alignment with international standards (e.g., ISO, Codex).
  • Indo-Pacific Stability:
    • Strengthens India-UK alignment in the Indo-Pacific, countering China’s economic and strategic influence.
    • Complements defense and technology cooperation under the India-UK Roadmap 2030.
  • Global Trade Positioning:
    • Bolsters India’s FTA strategy (e.g., with UAE, Australia, ongoing EU talks), enhancing its role as a global trade hub.
    • Supports UK’s post-Brexit trade diversification, reducing reliance on EU markets.
  • Innovation and Technology:
    • Promotes collaboration in FinTech, green energy, and medical technology (e.g., duties on MedTech reduced from 15% to 3%).
    • Encourages joint R&D and investment in sustainable technologies.
• Sustainability and Regulatory Impacts
• • Sustainable Practices: Provisions protect traditional knowledge in patents (e.g., genetic resources) and align with international standards (ISO, Codex, IEC).
    • Reduces non-tariff barriers via transparency (60-day advance notification of regulations) and mutual recognition of certifications (e.g., basmati rice, mangoes).
  • Trade Facilitation: Streamlined customs through Single Window and Authorised Economic Operator systems.
    • Bilateral SPS Committee to resolve technical issues, ensuring smoother agricultural exports.

Challenges of the India-UK CETA

• Economic Challenges
  • Tariff Reduction Imbalance: UK offers 100% tariff line liberalization. India provides 90%, potentially limiting export gains.
  • MSME Competitiveness: MSMEs (30.1% of GDP, 45.8% of exports) may struggle with UK standards. Compliance costs could limit benefits.
• Regulatory and Non-Tariff Barriers
  • Non-Tariff Barriers (NTBs): UK’s strict SPS and TBT measures may hinder exports. Certifications remain costly for agriculture and marine products.
    • India’s share in UK’s USD 63.4 billion agri-market (1.7%) and USD 5.4 billion marine market (2.25%) faces compliance hurdles.
  • SPS Committee Effectiveness: Bilateral SPS Committee meets twice yearly. Delays in resolving standards disputes could impact perishable exports.
• Social and Employment Concerns
  • Job Displacement Risk: Reduced tariffs on UK goods (e.g., whisky from 150% to 40%, cars from 100% to 10%) may hit Indian industries. 
    • Automotive and whisky sectors could lose jobs.
  • Skill Gaps for MSMEs: Artisans and MSMEs lack skills for UK quality standards. This limits competitiveness in textiles and leather.
• Professional Mobility and DCC Challenges
  • Visa Implementation: Simplified visas for Indian professionals (e.g., IT workers, yoga instructors) depend on UK immigration policies. 
    • Bureaucratic delays could restrict mobility.
  • Double Contribution Convention (DCC): DCC exempts Indian workers from UK social security for 3 years. Disputes over eligibility or reciprocity may arise.
• Geopolitical and Strategic Concerns
  • UK’s Economic Instability: UK’s post-Brexit challenges (e.g., inflation) may limit CETA commitments. FDI growth (USD 11.7 billion, 2000–2023) could slow.
  • China’s Influence: CETA counters China’s economic dominance. Rising India-China tensions could complicate trade strategy.
• Implementation and Monitoring Challenges
  • Execution Delays: Tariff cuts, visa simplifications, and SPS mechanisms need timely execution. Delays could reduce trade benefits.
  • Dispute Resolution: Lack of clear dispute resolution mechanisms may lead to trade conflicts. Issues like standards or tariffs could escalate.
• Domestic Political and Public Perception
  • Stakeholder Opposition: Dairy and automotive sectors may resist UK imports. Farmer protests could arise over perceived urban bias.
    • Dairy (5% GDP), automotive (7% GDP) are sensitive sectors.
  • Political Shifts: Changes in UK or Indian government priorities may affect CETA enforcement. Protectionism could rise.

Way Forward

• Protect Sensitive Sectors: Strengthen dairy (5% GDP, 80 million employed) and automotive (7% GDP) via PM Kisan and PLI schemes.
  • Monitor UK lobbying through Joint Economic and Trade Committee (JETCO) to safeguard farmers.
• Balance Tariff Reductions: Accelerate tariff cuts for Indian exports like textiles (1,143 tariff lines) via Economic & Financial Dialogue (EFD).
  • Negotiate Bilateral Investment Treaty (BIT) to ensure equitable trade benefits.
• Enhance MSME Competitiveness: Provide subsidies for UK certifications through MSME Ministry for SMEs (30.1% GDP, 45.8% exports).
  • Launch training under India-UK Vision 2035 to meet UK standards.
• Address Non-Tariff Barriers: Fast-track mutual recognition of standards for agri (1.7% of USD 63.4 billion market) and marine exports (2.25% of USD 5.4 billion market).
  • Strengthen SPS Committee with biannual meetings to resolve NTBs.
• Ensure Professional Mobility: Set up a visa taskforce to streamline processes for IT workers (USD 5 billion exports).
  • Clarify Double Contribution Convention (DCC) eligibility via JETCO for 3-year exemptions.
• Navigate Geopolitical Risks: Balance ties with China via WTO and UN reforms.
  • Strengthen Indo-Pacific security through Regional Maritime Security Centre of Excellence.
• Strengthen Implementation: Set clear timelines for tariff cuts and visas via Annual Ministerial Dialogue.
  • Establish a CETA Dispute Resolution Panel for transparent conflict resolution.

Conclusion

The India-UK CETA and Vision 2035 mark a transformative partnership, boosting trade, technology, and strategic ties. Effective implementation, MSME support, and geopolitical balance are key to realizing mutual prosperity. CETA can also serve as a template for other Free Trade Agreements (FTAs), such as with the European Union, fostering deeper trade and economic partnerships.

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