India-UK CETA: A Game-Changing Trade Pact Explained
India-UK Trade Deal Unlocks Billions!
India and the United Kingdom signed the Comprehensive Economic and Trade Agreement (CETA) on July 24, 2025, marking India’s most ambitious trade pact across 26 sectors, from tariffs to technology. Aimed at doubling bilateral trade from $56 billion to $112 billion by 2030, the agreement, sealed during Prime Minister Narendra Modi’s UK visit, introduces groundbreaking concessions, including India’s first-ever tariff cuts on automobiles and chapters on Trade and Gender Equality. Here’s a detailed explainer of its key provisions and impacts.
What are India’s major gains?
India’s $14.5 billion goods exports to the UK in FY2025 will see significant benefits, with 45% ($6.5 billion), including textiles, footwear, carpets, automobiles, seafood, and fruits like grapes and mangoes, gaining duty-free access, down from 4-16% tariffs. The remaining $8 billion, covering petroleum, pharmaceuticals, diamonds, and aircraft components, already enjoyed zero Most Favored Nation (MFN) tariffs. The UK’s elimination of tariffs on nearly all Indian goods, except rice and a few agricultural items, unlocks $23 billion in opportunities, boosting labor-intensive sectors.
What does the UK gain?
Of the UK’s $8.6 billion exports to India, 94% faced tariffs. CETA eliminates duties on 90% of UK goods, with 64%—including salmon, lamb, aircraft parts, machinery, and electronics—going duty-free immediately. Another 26%, such as chocolates, cosmetics, and auto parts, will see tariffs phased out over 10 years. Tariffs on silver, India’s top UK import at $2.1 billion, will drop to zero by 2035, enhancing UK competitiveness in India’s market.
Also Read: Historic India-UK Trade Pact Set for July 24 Signing in London
What are India’s auto sector concessions?
In a historic shift, India offers tariff concessions on UK passenger cars via a Tariff Rate Quota (TRQ). Luxury cars (petrol >3000 cc, diesel >2500 cc) will see duties drop from over 100% to 10% over 15 years, starting with a 10,000-unit quota, rising to 19,000 by year five. Mid-sized cars (1500-2500 cc diesel, up to 3000 cc petrol) start at 50% in-quota duty, falling to 10% by year five, while small cars (<1500 cc)="" follow="" a="" similar="" path.="" by="" year="" five,="" 37,000="" uk="" vehicles="" could="" enter="" at="" 10%="" duty,="" a="" sharp="" cut="" from="" 110%,="" though="" out-of-quota="" imports="" retain="" high="" tariffs="" (50-95%).="" this="" move,="" protecting="" india’s="" domestic="" auto="" industry="" while="" opening="" the="" market,="" may="" prompt="" similar="" demands="" from="" japan,="" the="" eu,="" and="" the="">
What about alcohol sector concessions?
India will slash duties on UK alcoholic beverages, including whisky, brandy, rum, vodka, liqueurs, mead, cider, and tequila, from 150% to 75% by year 10, provided they meet a Minimum Import Price (MIP) of $5 per liter or $6 per 750 ml bottle. Duties start at 110% in year one, reducing annually. This protects India’s domestic liquor market from cheap imports while boosting premium UK spirits like Scotch, with inflation-adjusted MIP reviews every 15 years. The Scotch Whisky Association projects a £1 billion export rise over five years, creating 1,200 UK jobs.
Which products are excluded from duty cuts?
India safeguards sensitive agricultural products, excluding fresh apples, walnuts, whey, blue-veined cheese, seeds, gold bars, and smartphones from tariff concessions. The UK excludes meat, egg-based products, semi-milled or fully milled rice, and cane or beet sugar, preserving domestic interests.
What’s in the government procurement chapter?
India opens 40,000 high-value central government contracts in transport, green energy, and infrastructure to UK suppliers, a first in its trade pacts. This shift from protectionism aligns with India’s $250 billion engineering export goal by 2030, fostering competitive bidding and transparency.
Are there Intellectual Property Rights concessions?
India’s IPR chapter includes a clause emphasizing “adequate remuneration” for patent holders under compulsory licenses, aligning with WTO’s TRIPS Article 31(h), per the Global Trade Research Initiative (GTRI). This subtly limits India’s ability to issue licenses for life-saving technologies during emergencies, a first in its trade agreements, raising concerns about access to affordable medicines.
What are the services sector provisions?
India grants UK firms access to accounting, auditing, financial services (74% FDI cap in insurance), telecom (100% FDI), environmental services, and air transport auxiliaries. The UK offers commercial presence in computer services, consultancy, and environmental services, plus 1,800 annual visas for Indian yoga instructors and classical musicians. This enhances India’s $18.4 billion services exports to the UK, its second-largest market after the US.
What is the Double Contribution Convention (DCC)?
The DCC exempts over 75,000 Indian workers on short-term UK assignments from UK social security contributions for three years, allowing payments into India’s system, saving costs for workers and employers. This addresses a key Indian demand, boosting professional mobility.
How does the UK’s carbon tax affect India?
India failed to secure an exemption from the UK’s Carbon Border Adjustment Mechanism (CBAM), effective January 2027. Carbon-intensive Indian exports like steel and aluminum face potential UK carbon taxes, even with duty-free CETA access, impacting competitiveness, per GTRI.
What is the current India-UK trade landscape?
In FY2025, bilateral trade hit $54.9 billion, with India’s $14.5 billion goods and $18.4 billion services exports yielding an $11.7 billion surplus. UK goods imports were $8.6 billion, services $12.6 billion. Key Indian exports include smartphones ($1.48 billion), aviation fuel ($1.29 billion), pharmaceuticals, and textiles. Gold bars ($2.1 billion) lead UK exports to India, followed by turbo-jets and scrap metals.
Economic and Strategic Impacts
CETA is projected to boost UK GDP by £4.8 billion and wages by £2.2 billion annually by 2040, with bilateral trade rising by £25.5 billion. India’s engineering exports could nearly double to $7.5 billion by 2029-30, and chemical exports may hit $750 million in 2025-26. The deal supports India’s $1 trillion export target by 2030, creating jobs in textiles, leather, and gems, while UK industries like automotive and whisky gain from reduced Indian tariffs.
Strategically, CETA strengthens the India-UK Comprehensive Strategic Partnership, building on the 2024 Technology Security Initiative. However, challenges remain, including CBAM’s impact and IPR concessions. Critics, like UK’s Kemi Badenoch, question the DCC’s “two-tier taxes,” while India’s exclusion of dairy and apples protects farmers but limits agricultural trade.
Implementation Timeline
Finalized on May 6, 2025, after 15 rounds of talks since January 2022, CETA’s legal text awaits verification. Post-signing, parliamentary approvals in both nations are required, with entry into force expected within a year, likely by mid-2026.
