Deals & Dividend: The India-UK FTA

The Comprehensive Economic and Trade Agreement (CETA) between India and the UK is a monumental step that was officially signed on 24th of July 2025, which starts a new chapter of economic cooperation.

Illustration by The Geostrata

This study is to reflect on the characteristics of this Free Trade Agreement, interpreting their various opportunities for both nations. We will also examine how the CETA proportionally structures the elimination of tariffs and market access across sectors important for manufacturing, services, and agriculture.

Furthermore, we will discuss the implications of the agreement as it could be a blueprint for FTAs in the future while simultaneously considering the nature of the challenges ahead. The next sections provide an interpretative analysis of the CETA's provisions and outcomes.

PECULIARITIES OF THE UK-INDIA FTA

The India-United Kingdom Comprehensive Economic and Trade Agreement (CETA) is an important milestone for both countries, looking to develop bilateral economic relations. Commerce and Industry Minister Shri Piyush Goyal signed the agreement with UK Secretary of State Mr. Jonathan Reynolds, which aims to double the current $56 billion (approx) bilateral trade to $112 billion by 2030.

Some of the key features of the CETA include the near complete (99.0%) liberalisation of tariffs which opens up 99% of India’s exports to the UK with duty-free access, and will benefit labour intensive sectors such as textiles and gems, as well as high-growth sectors such as engineering goods and auto parts. India was able to open up 92.0% of its tariff lines with goods coming from the UK and retained "some" protections for sensitive sectors, including dairy, gold and some agricultural products imported from the UK.

There were strong improvements in access to services in the CETA which is critically important not only because it contributes to India's economic growth, but also provides professional mobility for workers employed in sectors such as information technology, healthcare and finance.

The CETA has many innovative features, such as the Double Contribution Convention which allows Indian workers on temporary assignments to avoid dual social security payments, saving Indian companies and workers over INR 4,000 crore. (≈ US$459.2M)

IMPACT ON MANUFACTURING AND SERVICES

The India-UK Comprehensive Economic and Trade Agreement (CETA) will result in a fundamental shift in both manufacturing and services through the removal of tariffs on 99% of India's exports to the UK, and providing substantial advantages and opportunities for Indian exporters, with all large sectors, particularly textiles, pharmaceuticals and IT, being able to secure substantial possibilities for competitive pricing at scale.

Furthermore, Indian exporters will also directly benefit from this agreement, being Small and Medium Enterprises, in labour-intensive industries, obtaining greater market access, ultimately leading to the savings mentioned previously in the aggregate from financing only, which for the UK is in respect of the deep, pervasive market access with regard to services, as India previously committed to opening up 108 sub-sectors including legal services (lawyers), financial services, and education services.

This CETA also covers professional mobility and contains a Double Contribution Convention, which is a huge benefit for large industries and broadly for Indian professionals proposing to work here, restricting the amount of money required to contribute to both countries in social security, ultimately saving the Indian economy INR 4,000 crore or approximately US$485 million. Overall, the agreement promotes diverse, rich economic resilience and inclusive growth for all businesses, large and small.

AGRICULTURE AND ALLIED SECTORS

The India-UK CEPA is a landmark development for India, especially with respect to agriculture and allied sectors since we get over 95% of agribusiness and processed food products market duty-free access to the UK. This is a game changing development, as now Indian products will stand at the same podium as South Africa and the European Union, who are significant agri-exporters into the UK.

The Indian market access includes market access for high-value agri-products behind tea, grapes, spices, marine products etc. and these exports will increase by greater than 50% over the next three years. What an astounding achievement.

The devil is in the details but generally Indian trade policy is heavily influenced by the fear of imports that affect agriculture so India was "conservative" (looking after their domestic market) on sectors like dairy, cereals, millets, pulses, etc. even gold, which are both sensitive and strategically important to the domestic economy and protectionist model.

The CETA represents a substantial opportunity for food processing cooperation. Almost 99.7% of processed food lines have an agreed tariff rate of zero per cent, representing a significant advantage to Indian exporters as this means they can offer more competitive pricing as compared to US and Chinese competition. The UK has strong demand for processed food produced abroad, and India has certain production advantages that create a positive case for joint ventures and transfer of technology.

ECONOMIC AND STRATEGIC EFFECTS

The recently signed United Kingdom–India Free Trade Agreement (FTA) on 25 July is expected to boost bilateral trade from £44.1 billion or US$56 billion in Q1 of 2025 to US$120 billion by 2030 at a rate of 15% per annum. The UK exports to India are projected to rise 60%, which could potentially bring in an additional £15.7 billion ($19.6 billion) by 2040, while India will retain its trade surplus.

The main beneficiaries will include the textiles, engineering goods, food processing, pharmaceuticals, automotive, information technology, life sciences, education, and beverages sectors. These tariff cuts will enable UK exporters to save on tariffs straight away and over time to the value of £400 million ($500 million) now and £900 million ($1.13 billion) over a ten-year period.

This FTA is strategically the UK's most significant bilateral agreement post-Brexit, supporting the UK's position as an Indo-Pacific trading nation.

For India, it helps enhance its leverage with the EU/US and provides an effective counterweight to China's influence in the region, and sets the tone for closer cooperation on things such as digital regulation, professional mobility, and supply chain resilience.

CHALLENGES AND ROADBLOCKS

Migration continues to be a significant challenge for UK–India relations. The UK is committed to its position on immigration and there has been little willingness to ease visa rules in strategic areas, especially the HGV one which is reported to be standing still for the FTA discussions.

Likewise, India's neutral stance on the Russia–Ukraine conflict clashes with the UK’s unwavering pro-Ukraine position, complicating the foreign policy relationship. There are also frictions on climate policy, especially around the proposed Carbon Border Adjustment Mechanism (CBAM), planned for 2027, which India interprets to be narrowly framed protectionism aimed at key export sectors, such as steel and iron.

Pro-Khalistan separatist activities in the UK are already a deep source of stress for bilateral relations, as India considers these activities to be infringements on its sovereignty.

There are ongoing tariff fights, notably focused on Scotch whiskey (from 150% down to 75%), lower tariffs on farm products, and the UK sought more access to India’s extremely protected services base. Market access and IPR matters are still contentious issues.

The UK is looking for Intellectual Property Rights with a stronger governance aspect, while India is not in favour, due to its specific public health conditions, especially for the generic pharmaceuticals it makes. India is attempting to balance domains on innovation and public health, while resolving the outstanding disputes remains integral to advancing the bilateral trade negotiation process.

THE ROAD AHEAD

Looking ahead, India's UK CETA will continue to progress in its negotiations, with future rounds in place, and various ways to strengthen economic ties. Digital services, sustainable technologies, and financial services are key sectors to watch, with potential for growth as global economies adapt to the new legal framework established by the CETA.

This agreement has the potential to serve as a template for future FTAs, as it achieves a balance of tariff elimination while still including flexibility for domestic sectors of sensitive to trade.

If the CETA values professional mobility in a manner beyond other FTAs and prioritises digital commerce, it could become a deal that informs future trade agreements between major economies through professional mobility in a way that combines and supports both aspects of modern trade. The practical aspects of this agreement, streamlined systems working together, including the focus on new industry, present a forward-looking model for 21st-century trade.

CONCLUSION

The India-UK CETA is a comprehensive vision of international trade, integrating economic opportunity and strategic direction. The CETA plan drives bilateral trade and job creation in several important sectors. It also establishes a new benchmark for future FTAs that must address the contemporary trade aspects, such as professional mobility and moving towards a digital service eighth function.

The CETA represents the opportunity to nurture our domestic industries by protecting them while opening new markets. We challenge our actions in a progressive way, and towards inclusive and resilient growth within the evolving global economy, for an advancing global economic partnership between the UK and India.

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BY VAIBHAV PANDEY AND DEEPTI

CENTRE FOR INDUSTRY AND INNOVATION

TEAM GEOSTRATA

info@thegeostrata.com