THE CONTEXT: The India-UK CETA, signed on 24 July 2025, grants zero-duty access on 99 per cent of tariff lines and aims to double bilateral trade from about USD 56 billion to USD 112 billion by 2030. The pact fits the Government’s calibrated shift from defensive trade policy (withdrawal from RCEP in 2019) to “tailored” FTAs with complementary economies (UAE, Australia, EFTA, UK) that can accelerate the $5-trillion-economy trajectories.
HISTORICAL BACKGROUND OF INDIA-UK TRADE ENGAGEMENT:
-
- 2007-13: FTA talks stalled when the UK negotiated inside the European Union.
- 2016-20: Brexit and multiple UK leadership changes delayed progress; India focussed on WTO-plus reforms (e.g., Trade Facilitation Agreement) and exited RCEP.
- 2022-25: Fifteen formal rounds culminated in a “May 2025 joint finalisation” and signature under Prime Ministers Narendra Modi and Keir Starmer.
THEORETICAL LENS:
-
- Strategic Autonomy vs. Deep Integration: India’s tariff staging and sensitive-list protections embody a “neo-developmental state” model—integrating into Global Value Chains (GVCs) without ceding policy space for food security and infant industries.
- Weaponised Interdependence: By diversifying partners away from a China-centred trading architecture, CETA hedges against supply-chain coercion and carbon-border measures.
- Competitive Liberalisation: Sequencing bilateral wins (UAE→Australia→EFTA→UK) enhances India’s negotiating leverage with the European Union and the United States.
SALIENT PROVISIONS OF CETA:
| PILLAR | KEY COMMITMENTS | NOTES |
|---|---|---|
| Goods | UK removes duties on 99 % of lines at entry into force; India removes ~90 % over staged periods. | Automobiles: 100-pp cut but capped quota of 2,000 units/yr for ≥2500 cc engines. |
| Agriculture | 95 % of farm lines duty-free for India; exclusions for dairy, apples, oats, edible oils. | Guards price stability & nutrition security. |
| Fisheries | Tariffs (up to 20 %) on shrimp, squid, lobsters to 0 %. | Expected 70 % export surge. |
| Services & Mobility | 36 sub-categories of Contractual Service Suppliers (CSS); combined quota 1,800 per annum; five-year visa for ICT transferees. | Includes yoga instructors, chefs, musicians. |
| Double Contributions Convention (DCC) | Waives UK social-security payments for Indian employees on assignments ≤3 years; est. savings ₹ 4,000 crore for 60,000 IT professionals. | |
| Government Procurement | UK firms treated as Class-II local suppliers with 20 % domestic value addition: access to 40,000 central tenders (£38 bn). | |
| IPR | Preference for voluntary licences but retains TRIPS flexibilities; three-year “working” data-deferral clause for patentees. | |
| Environment & Labour | India’s first binding FTA chapters on gender, labour rights, marine plastics, anti-corruption. |
COMPARATIVE SNAPSHOT WITH RECENT FTAs:
| Parameter | UAE-CEPA (2022) | Aus-ECTA (2022) | EFTA-TISA (2024) | UK-CETA (2025) |
|---|---|---|---|---|
| Tariff lines duty-free for India | 97 % | 96 % | 98 % | 99 % (highest) |
| Investment side-letters | No | Double-tax removal for IT | $100 bn investment guarantee | DCC + public procurement access |
| Sensitive-list breadth | Gold, Petroleum | Agriculture | Dairy | Dairy, apples, oats, oils (targeted) |
SECTOR-WISE IMPACT ASSESSMENT:
| SECTOR | PRESENT SHARE IN UK IMPORTS | CETA OPPORTUNITY | INCLUSIVE-GROWTH LINK |
|---|---|---|---|
| Textiles & Apparel | $1.79 bn of UK’s $27 bn market (6 %) | Duty cut 8-16 % → potential 5 % market-share jump within 2 years. | MSME clusters Tiruppur, Panipat, Surat; women-intensive employment. |
| Gems & Jewellery | $0.94 bn | Exports projected to double in 2-3 years. | Skill upgradation for traditional artisans. |
| Leather & Footwear | 16 % duty removed | Exports could reach $1 bn; benefits Agra, Kanpur, Kolhapur corridors. | Labour-intensive jobs for semi-skilled youth. |
| Seafood | 2.25 % share of UK market | 70 % rise forecast: zero duty on HS-03, 1604. | Coastal livelihood boost for 28 million fisherfolk. |
| Automobiles | Premium segment | Gradual duty cut to 10 % for 2,000 high-end cars; EVs priced >£40k fully duty-free. | Tech spillovers into EV supply chains. |
INCLUSIVE-GROWTH POTENTIAL: Gujarat’s chemical–textile–diamond triangle, Odisha’s shrimp processors, and women-led SHGs in turmeric/pepper value chains are flagged by state export promotion councils as the “first-mover” beneficiaries.
CHALLENGES, VULNERABILITIES AND CRITIQUES:
-
- Public-Procurement Dilution: 20 % local-content threshold lets UK suppliers’ source 80 % inputs from third countries risking Make in India preference erosion.
- Limited Mobility Quota: 1,800 CSS visas versus India’s IT workforce demand; may constrain services gains.
- Carbon Border & SPS Standards: Potential non-tariff barriers (NTBs) from future UK carbon-pricing and stringent labelling could offset tariff advantages.
- Fiscal Impact: Gradual excise-duty rationalisation for premium spirits and autos may trim state revenues.
- IPR Flexibility Squeeze: Preference for voluntary licensing could lengthen patent monopolies, affecting generic pharma access.
GOVERNANCE ARCHITECTURE:
-
- Joint Committee at Minister-level reviews every two years.
- Rapid-Response Mechanism for Sanitary and Phytosanitary, Technical Barriers to Trade disputes within 30 days.
- Snapback Safeguard: Either side may re-impose MFN tariffs if import surge causes “serious injury” to domestic industry.
GLOBAL AND STRATEGIC IMPLICATIONS:
-
- CETA is a template-setter: concessions offered here will form the reservation price for EU and US negotiators.
- It also signals India’s readiness to anchor alternative supply chains for critical inputs (e.g., electronics, green tech) amid US–China trade frictions.
THE WAY FORWARD:
-
- MSME Export-Readiness Fund: Establish a ₹5,000-crore credit-plus-capacity programme to help small firms meet UK conformity-assessment and ESG norms.
- Origin-Compliance Cell: Deploy blockchain-based QR tags under DGFT to curb “origin fraud” and secure Rules-of-Origin benefits.
- Coastal SEZ Aquaclusters: Fast-track seafood processing hubs with SPS labs in Andhra and Odisha to exploit zero-duty window.
- Textile MMF Mission 2.0: Incentivise man-made-fiber value chain investment through PLI-style sops, targeting winter-wear and athleisure for UK retail chains.
- Tariff-Revenue Buffer: Ring-fence a portion of GST compensation cess to offset states’ excise loss from liquor-tariff cuts.
- Green-Logistics Corridors: Align Sagarmala and dedicated freight projects to cut lead-time to UK ports by 20 %, reinforcing competitiveness.
- Skill India-UK Mobility Bridge: Expand National Skill Development Corporation (NSDC) tie-ups with UK awarding bodies to pre-certify 10,000 professionals annually for CSS quotas.
- IPR-Access Safeguard Clause: Mobilise compulsory-licence readiness under Patent Act §92A if voluntary licences delay affordable medicines.
THE CONCLUSION:
CETA exemplifies “balanced pragmatism” opening premium UK markets for India’s farm, fishery and MSME sectors while ring-fencing critical vulnerabilities. Success now hinges on rapid domestic reforms of quality infrastructure, origin compliance, and skill pipelines to translate tariff gains into jobs-and-livelihoods dividends by 2030.
UPSC PAST YEAR QUESTION:
Q. The aim of Information Technology Agreements (ITAs) is to lower all taxes and tariffs on information technology products by signatories to zero. What impact should such agreements have on India’s interests? 2014
MAINS PRACTICE QUESTION:
Q. In context of India-UK CETA, analyse how the agreement can serve as a prototype for India’s future mega-trade negotiations, and identify the domestic reforms necessary to maximise its developmental dividends.
SOURCE:
Spread the Word