Why in news?

Recently, India and the U.K. formally signed a Comprehensive Economic and Trade Agreement (CETA), concluding negotiations that began in January 2022.

The pact, finalized after more than three years of intense discussions, aims to significantly boost bilateral trade and deepen economic ties between the two countries.

What’s in Today’s Article?

• Key Takeaways from the India-U.K. Trade Deal
• India-U.K. Trade Deal Goes Beyond Goods — Services and Workers Benefit Too
• India-U.K. FTA Features Unusual Provisions on Cars and Government Procurement
• Conclusion

Key Takeaways from the India-U.K. Trade Deal

• The India-U.K. trade agreement offers substantial tariff reductions on both sides.
• The U.K. has agreed to remove tariffs on 99% of its product lines, benefiting around 45% of India’s current exports such as textiles, footwear, automobiles, seafood, and fresh fruits like mangoes and grapes — all of which will now enter the U.K. duty-free.
• Meanwhile, India will cut or reduce duties on 90% of its tariff lines, covering 92% of U.K. exports to India.
• This means British whisky, cars, and engineering goods will become more affordable for Indian consumers.
• Notably, India’s high-value exports like petroleum products, pharmaceuticals, and diamonds already enjoy duty-free access in the U.K.
• Although the U.K. is not among India’s top trading partners — accounting for just 3.3% of exports and 1.2% of imports in 2024–25 — the deal marks a significant step in enhancing bilateral trade and economic cooperation.

India-U.K. Trade Deal Goes Beyond Goods — Services and Workers Benefit Too

• The India-U.K. Comprehensive Economic and Trade Agreement (CETA) is not limited to trade in goods; it also includes a strong focus on services — a key area for India’s economy.
• Under the agreement, India will open sectors like accounting, auditing, financial services, telecom, and environmental services to U.K. companies, allowing them to offer services in India without setting up a local office, while enjoying the same treatment as Indian firms.
• India has also agreed to recognise U.K. professional qualifications in fields such as law and accounting (excluding legal practice).
• On the flip side, Indian companies will now be allowed to establish offices in the U.K. in sectors like IT, consulting, and environmental services.
• A major win for Indian workers comes through the Double Contribution Convention (DCC), a separate agreement signed alongside CETA.
• It ensures that 75,000 Indian workers on short-term assignments in the U.K. can continue contributing only to India’s social security system, avoiding double payments in both countries.
  • This is a significant relief for those who typically don’t stay long enough in the U.K. to benefit from its system.

India-U.K. FTA Features Unusual Provisions on Cars and Government Procurement

• While most aspects of the India-U.K. trade deal follow a typical pattern of tariff and service liberalisation, it includes a few notable exceptions.
• For the first time, India has agreed to reduce import duties on cars through a trade pact.
• Import duties on large-engine luxury petrol cars from the U.K. will drop from 110% to 10% over 15 years, though within a quota system starting at 10,000 cars and rising to 19,000 in year five.
• Mid-sized and small cars will also see gradual tariff cuts to 10% by the fifth year, again within quotas. These phased cuts are designed to give Indian carmakers time to adjust.
• However, electric, hybrid, and hydrogen vehicles are excluded from duty cuts for the first five years to protect India’s emerging green vehicle sector.
• Another unusual feature is that the U.K. will now be allowed access to Indian government procurement.
  • India will open up around 40,000 high-value central government contracts in areas like transport, renewable energy, and infrastructure, allowing U.K. companies to bid for them.

Conclusion

The India-U.K. trade deal is not yet in force. It must first be ratified by the Cabinets of both countries, a process expected to take six months to a year.

For India, the agreement is not just significant in its own right — it could also act as a template for future trade negotiations with major economies like the U.S. and the European Union.