Dipak Kurmi
In a transformative moment for global trade and geopolitics, India and the United Kingdom have signed the Comprehensive Economic and Trade Agreement (CETA), a landmark accord that signifies not only a recalibration of their bilateral economic relationship but also a strategic realignment in an era of global uncertainty. Emerging from the turbulence of the post-Brexit landscape, persistent trade protectionism, and the ripple effects of U.S. President Donald Trump’s trade wars, this agreement is a robust response to the global economic disorder. It projects a vision of stability, partnership, and mutual economic resilience.
The CETA is India’s most comprehensive free trade agreement to date, spanning an extraordinary array of sectors including goods and services trade, digital commerce, investments, government procurement, intellectual property rights (IPR), labour standards, and environmental safeguards. Signed on May 6, 2025, the deal aims to double bilateral trade from the current $55 billion to an ambitious $120 billion by 2030. This trajectory not only symbolizes growth but represents a critical geopolitical pivot — a strengthening of ties between two of the world’s most influential democracies rooted in a shared legacy of the Westminster system and deep cultural connectivity.
Breaking Through Years of Negotiation and Uncertainty
India and the UK began exploring a trade deal as early as 2007 when the UK was still part of the European Union. However, the negotiations fell apart due to irreconcilable differences, especially regarding access to sensitive Indian sectors like agriculture and automobiles. After India exited the Regional Comprehensive Economic Partnership (RCEP) in 2019, wary of being flooded with Chinese imports, attention turned westward, and bilateral discussions gained momentum. The Diwali deadline set by then UK Prime Minister Boris Johnson was missed due to political upheaval in the UK, which saw three Prime Ministers take office between 2022 and 2025.
Eventually, with the Labour Party’s landslide victory under Keir Starmer in May 2025, a coherent political mandate enabled the agreement’s finalisation. A significant external trigger was President Trump’s controversial “Liberation Day” reciprocal tariff policy that fractured the multilateral trade system under the WTO, forcing nations to seek bilateral deals that secured economic predictability. The India-UK CETA was thus not just a diplomatic triumph, but a strategic imperative.
Expanding Market Access and Tariff Reductions
One of the most lauded outcomes of the agreement is the substantial reduction in tariffs. The UK has committed to eliminating duties of up to 20% on critical Indian export sectors like textiles, footwear, gems and jewellery, and marine products — sectors that are high in employment generation. Particularly notable is the UK’s decision to eliminate tariffs on 99.7% of food sector tariff lines, which were previously as high as 70%. This is expected to give a substantial boost to Indian exports of dairy, meat, seafood, and other animal products.
India, on its part, has reciprocated by removing tariffs on 90% of UK goods, which account for 92% of total existing tariff lines. The most headline-worthy concession is in the automotive and alcoholic beverages sectors. Indian tariffs on UK-made cars — which were historically as high as 100% — will now fall to 10% under a phased tariff-rate quota system. Similarly, India has opened its liquor market for the first time to a broad range of UK-origin alcoholic products, including whisky, vodka, rum, brandy, cider, and tequila.
These products, currently facing a 150% base customs duty, will benefit from progressive duty reductions, falling to 75% immediately and down to 40% over a ten-year period — but only if they meet a Minimum Import Price (MIP) of $5 per litre or $6 per 750 ml bottle. This nuanced provision protects domestic producers from low-end imports while offering high-quality UK spirits a price advantage, in alignment with domestic interests. Given that India accounts for half of global whisky consumption, and imported Scotch makes up just 2% of Indian-made foreign liquor (IMFL) sales, the market potential is staggering.
Strategic Public Procurement and the Shift in Indian Trade Doctrine
In a dramatic policy shift, India has allowed UK firms to participate in a category of government tenders — offering them "Class Two" status under the ‘Make in India’ rules, which require a minimum 20-50% domestic value addition. The UK is the first major economy to receive such generous access. Analysts note that this provision could have far-reaching implications for future free trade agreements with larger economies such as the EU or the United States, potentially limiting India’s ability to use public procurement as a tool for industrial policy, import substitution, and employment generation.
The current arrangement allows UK companies to source up to 80% of inputs from third countries, including China and the EU, while still qualifying under India’s domestic preference rules. The New Delhi-based think tank Global Trade Research Initiative (GTRI) has remarked that this effectively dilutes the intended benefits of programs like Atmanirbhar Bharat and raises questions about future strategic autonomy in procurement.
Intellectual Property Rights: A Quiet Concession
The IPR chapter marks a departure from India’s traditionally cautious stance. For the first time, the deal explicitly endorses voluntary licensing over compulsory licensing, particularly in the pharmaceutical sector. This could constrain India’s capacity to ensure affordable access to medicines during public health emergencies. The agreement also adopts provisions similar to those found in the EFTA agreement, allowing patent holders to withhold details on the working of patents for up to three years — a clause that could affect transparency and accountability in public interest cases.
While not all observers are alarmed, several experts have noted that this shift in policy space could potentially limit India’s longstanding leadership in generic drug manufacturing, especially if extended to future FTAs with the EU or the U.S.
Services, Digital Trade, and Talent Mobility
Perhaps the most forward-looking aspect of the India-UK CETA is its emphasis on services and digital trade — areas where both countries have considerable comparative advantages. The agreement facilitates the mutual recognition of professional qualifications and streamlines visa processes to enable the movement of skilled professionals, educators, and healthcare workers. Most notably, the Double Contribution Convention Agreement (DCCA) will exempt Indian professionals on short-term assignments from paying into the UK’s social security system.
Under this system, Indian workers will pay social security contributions in India for the first year and will be exempt from UK payments for the next two years — a win for Indian professionals, especially in IT, financial services, and healthcare. It is expected to translate into 20% savings in salary costs for over 75,000 Indian IT professionals currently working in the UK.
Investment Flows, Dispute Resolution, and Bilateral Growth
The agreement includes provisions to enhance investor confidence by promoting regulatory stability and transparency, especially in critical areas such as advanced manufacturing, renewable energy, and infrastructure. While negotiations on a Bilateral Investment Treaty (BIT) remain ongoing, CETA includes a modern government-to-government dispute settlement mechanism aimed at swift resolution of trade disputes — enhancing predictability for businesses.
India’s exports to the UK grew by 12.6% in 2024–25 to reach $14.5 billion, while imports rose by 2.3% to $8.6 billion. Overall, bilateral trade touched $21.34 billion in 2023–24, up from $20.36 billion the previous year. With the CETA now in place, this growth trajectory is expected to accelerate, reinforcing India’s long-standing trade surplus with the UK — a rare phenomenon in India’s trading relationships with developed economies.
A Template for Future Engagements
The India-UK CETA is more than a trade agreement — it is a geopolitical statement. It underscores India’s readiness to engage in complex trade diplomacy, shedding remnants of protectionism in favour of strategic openness. It is also a demonstration of resilience, negotiated through Brexit disruptions, missed deadlines, and shifting political landscapes on both sides.
It establishes a new model for future Indian trade engagements — one that balances domestic sensitivities with global ambitions, and which embraces a pragmatic, sector-by-sector approach. As the world inches towards regionalism and fragmentation, this pact is a reminder that bilateralism, when thoughtfully executed, can serve as a powerful anchor of economic stability and cooperation.
The final ratification by the British Parliament will make this agreement operational. But its success will hinge on how swiftly and efficiently both governments implement its roadmap. If realised in full, the India-UK CETA could very well be the fulcrum around which a new era of Indo-British strategic and economic cooperation is built — one that honours history while embracing the future.
(The writer can be reached at dipakkurmiglpltd@gmail.com)
