India-UK Free Trade Agreement

India-UK Free Trade Agreement 2025, or the India-U.K. Comprehensive Economic and Trade Agreement (CETA) was signed after three years of negotiations. Read here to learn about the strategic and economic implications of the deal.

The India-U.K. Comprehensive Economic and Trade Agreement (CETA), signed on July 24, 2025, is a landmark free trade agreement that aims to deepen economic ties between the two democracies.

Coming after over three years of negotiations since January 2022, this agreement marks a significant shift in post-Brexit Britain’s trade strategy and aligns with India’s goal to expand its global trade footprint under initiatives like Atmanirbhar Bharat and Make in India.

India-UK Free Trade Agreement (CETA)

1. Tariff Liberalisation:
   • K. Concessions:
     • Tariffs eliminated on 99% of product lines.
     • 45% of India’s current exports to the U.K., worth approximately $6.5 billion, including textiles, footwear, carpets, automobiles, seafood, fruits like mangoes and grapes, will now be duty-free.
     • The remaining $8 billion (pharma, petroleum, diamonds, aircraft parts) already had zero-duty access.
   • India’s Commitments:
     • India to eliminate or reduce tariffs on 90% of tariff lines, covering 92% of the U.K.’s exports to India, including alcohol (especially whisky), cars, and engineering goods.

2. Opening of the Services Sector:
   • The U.K. will gain enhanced access to India’s services market, including in legal, financial, educational, and professional services.
   • India to benefit from easier mobility of service professionals and liberalised visa regimes for skilled workers, IT professionals, chefs, and yoga instructors.
3. Investment and Regulatory Cooperation:
   • A separate Investment Chapter under negotiation is expected to follow.
   • Frameworks for mutual recognition of professional qualifications, standardisation, and data protection mechanisms are under discussion.
4. Rules of Origin and Safeguards:
   • Clear provisions on rules of origin to prevent third-country trans-shipment.
   • India retains safeguard mechanisms to protect sensitive domestic sectors from sudden import surges.
5. Digital Trade and Sustainability:
   • Provisions for digital trade facilitation, e-commerce, and data localisation discussions.
   • Shared commitments to labour standards, environmental protection, and carbon neutrality, a nod to the U.K.’s climate diplomacy and India’s climate goals under Panchamrit.

What is the Double Contribution Convention?

The Double Contribution Convention (DCC), agreed alongside the CETA, allows Indian professionals working in the U.K. to avoid paying social security contributions in both countries. This provision will:

• Benefit over 50,000 Indian IT and healthcare professionals working in Britain.
• Enhance the ease of mobility and incentivise Indian service exports by reducing financial burdens.
• Provide reciprocity for U.K. nationals employed in India.

Implications for India

Economic Gains

• Increased exports to the U.K. in labour-intensive sectors (textiles, footwear, marine products).
• Boost to MSMEs and agri-exports, especially for perishable fruits.
• Job creation across export-linked sectors.

Strategic Leverage

• Enhances India’s role in global supply chains, positioning it as a counterweight to China in the Indo-Pacific.
• Deepens bilateral ties with a permanent UN Security Council member, G7 nation, and Commonwealth partner.
• Strengthens India’s credibility as a rule-abiding economic partner in FTAs, supporting future negotiations with the EU and GCC.

Services Sector Advantage

• Indian professionals, especially in IT, healthcare, education, and hospitality, to benefit from easier movement and fewer regulatory hurdles.
• Boosts India’s service exports, which already account for over 40% of total exports.

Concerns and Challenges

1. Domestic Industry Sensitivity:
   • Indian automobile and liquor industries may face competitive pressures due to cheaper imports from the U.K.
   • State governments (especially in alcohol-regulating states) may raise concerns over regulatory autonomy.
2. Asymmetrical Gains?
   • While the U.K. gets broader access in services and investment, India’s gain is mostly in merchandise trade.
   • Critics warn against the premature opening of sensitive sectors before adequate capacity building.
3. Implementation Bottlenecks:
   • Realising the potential of CETA requires:
     • Customs modernisation
     • Logistics upgradation
     • Export facilitation for MSMEs
     • Quick resolution of non-tariff barriers (NTBs)

4. Digital Sovereignty:
   • The digital trade chapter may raise concerns over India’s data localisation policies and strategic tech autonomy.

When Will the Trade Deal Come into Effect?

• The CETA will be implemented from October 1, 2025, after ratification by the Indian Parliament and the U.K. House of Commons.
• Provisions related to tariff cuts, mobility, and professional services will be phased in over the next five years, depending on sectoral timelines.

India-U.K. CETA vs India-UAE CEPA

Way Forward

• Capacity Building: India must strengthen domestic manufacturing, infrastructure, and skilling initiatives to fully leverage the trade benefits.
• Trade Diplomacy: Use CETA as a template for future FTAs, including those with the EU, EFTA, and ASEAN.
• Inclusive Growth: Ensure that gains are widely distributed, especially among rural producers, MSMEs, and women entrepreneurs.
• Regulatory Sovereignty: Balance commitments on digital, environment, and IP with national priorities.

Conclusion

The India-U.K. Comprehensive Economic and Trade Agreement is not just a trade pact; it is a strategic investment in a shared future between two democracies.

While challenges remain, the deal holds transformative potential for India’s exporters, professionals, and service sector, provided its implementation is supported by domestic readiness and strategic vision.

Read:

• India-United Kingdom Relations