Otherwise a game-changer, India-UK FTA called CETA must be read with caveats

In a landmark move for India’s economic ambitions, the India-United Kingdom Free Trade Agreement (FTA), officially termed the Comprehensive Economic and Trade Agreement (CETA), was signed on July 24. This historic deal, sealed during Prime Minister Narendra Modi’s visit to the UK, promises to reshape India’s trade landscape by doubling bilateral trade to USD 120 billion by 2030.

For Indian businesses, workers and consumers, the FTA opens doors to new markets, job opportunities and economic growth. However, as with any major agreement, there are caveats to consider. 

Boost for Indian exports

The FTA is a game-changer for Indian exporters, with 99% of India’s tariff lines gaining zero-duty access to the UK market. This covers a vast array of goods, from textiles and leather to marine products, gems, jewellery, auto components and organic chemicals. 

For Indian farmers and food processors, products like turmeric, pepper, cardamom, mango pulp, pickles, pulses, shrimp and tuna will now enter the UK duty-free, with 95% of agricultural and processed food exports benefiting immediately. This is expected to double India’s apparel and home textile trade within five to six years, creating a ripple effect for small and medium enterprises (SMEs) and rural economies.

For example, industries in states like Tamil Nadu, Gujarat and Maharashtra, which dominate textile and leather production, stand to make major gains. The agreement is projected to increase bilateral trade by £25.5 billion ($34 billion) annually by 2040, with sectors like engineering goods and auto components seeing exponential growth. This translates to more orders for Indian manufacturers, more jobs for skilled workers and higher incomes for farmers supplying raw materials. 

Job creation and professional mobility

The FTA will likely prove a lifeline for India’s service sector and workforce. The agreement streamlines mobility for Indian professionals in fields like IT, finance, education, architecture and even niche areas like yoga instruction and culinary arts. 

The Double Contribution Convention (DCC) is a standout feature, exempting Indian workers on short-term UK assignments (up to three years) from paying UK social security contributions. This reduces costs for Indian professionals and companies, making it easier for tech experts, consultants and engineers to work in the UK.

For young Indians, this opens up global career opportunities without the burden of double taxation. 

The deal further facilitates easier access for temporary business visitors, boosting entrepreneurship and collaboration. 

Start-ups and micro, small and medium enterprises (MSMEs) will find new avenues to scale, especially in technology and innovation-driven sectors. Union Minister Piyush Goyal has called the FTA “game-changing” for its inclusivity, particularly for women, youth and rural entrepreneurs.

Economic growth and strategic gains

The CETA positions India as a value-creating powerhouse, moving beyond its cost-driven export model. By integrating India into global value chains, the agreement strengthens its role in international trade. 

It’s also a strategic win, marking India’s largest trade deal with an advanced economy. Analysts from ICRA and CareEdge predict a 15% annual trade growth until 2030, which is likely to transform India into a hub for high-value exports like pharmaceuticals and auto parts.

Furthermore, the agreement supports sustainable practices, with provisions for clean energy procurement and reduced non-tariff barriers. This is in sync with India’s climate goals and it encourages innovation in green technologies. 

For Indian consumers, the influx of high-quality UK goods — like cosmetics, chocolates and medical devices — at lower prices due to tariff cuts (from 15% to 3% on average) could enhance lifestyle choices.

Caveats

While the India-UK CETA is a monumental step, it’s not without challenges. The UK’s Carbon Border Adjustment Mechanism (CBAM), set to impose taxes on high-carbon imports from 2027, is not exempted under the agreement. This could impact carbon-intensive Indian industries like steel and cement, which may raise costs for exporters. Indian negotiators will need to address this to protect affected sectors.

Additionally, the phased tariff reductions on some UK goods mean that India has safeguarded sensitive sectors like dairy, edible oils and certain agricultural products. However, this could delay benefits for Indian consumers expecting immediate access to cheaper imports. 

Regulatory clarity on non-tariff barriers, particularly for pharmaceuticals and medical technology, will be critical to unlocking the FTA’s full potential. Indian businesses must prepare for compliance with UK standards to maximise gains.

British perspective

From the UK’s viewpoint, the CETA is its biggest post-Brexit trade deal, projected to add £4.8 billion annually to its GDP by 2040 and boost wages by £2.2 billion. 

British exporters gain access to India’s massive market, with tariffs on 90% of UK goods dropping substantially. For instance, Scotch whisky tariffs will halve from 150% to 75% immediately, eventually reaching 40% over a decade, while car duties in India will fall to 10% within five years from up to 110%. This benefits UK firms like Diageo, BMW, Nissan and Jaguar Land Rover, enhancing their competitiveness in India.

Moreover, the UK secures easier access for its service sectors, including finance, telecom and education, fostering collaboration with Indian firms. However, the UK has made concessions, such as phased import access to protect Indian sensitivities and faces challenges in fully liberalising India’s agricultural market. 

The agreement’s success for the UK hinges on navigating India’s complex regulatory landscape and ensuring reciprocal market access.

Looking ahead

The India-UK FTA, accompanied by the India-UK Vision 2035 strategic cooperation plan, sets the stage for deeper collaboration in trade, technology, defence and climate initiatives. With ratification expected within a year, Indian businesses, workers and policymakers must act swiftly to leverage this opportunity. 

By addressing issues like CBAM and non-tariff barriers, India can ensure the FTA delivers on its promise of economic transformation.

For Indians, this deal is a beacon of opportunity — more jobs, bigger markets and a stronger global presence.