The India-UK Trade Agreement, formally known as the Comprehensive Economic and Trade Agreement (CETA), marks a historic milestone in India’s international economic diplomacy. Signed in 2025 after more than three years of negotiations, the deal aims to double bilateral trade between the two countries by 2030. The agreement was reached amid a challenging global landscape shaped by inflationary pressures, geopolitical tensions, and shifting trade alliances.
Overview of the Agreement
The India-UK Trade Agreement is comprehensive in scope. It removes tariffs on 99% of Indian exports to the UK and grants 90% of UK goods tariff-free access to the Indian market. This is expected to substantially boost trade volumes and economic cooperation between the two countries. The agreement now awaits parliamentary approval in the UK, while India has already cleared it through the cabinet.
Key Indian sectors poised to benefit include textiles, gems and jewellery, seafood, engineering goods, and footwear. On the other hand, British medical devices, aerospace components, and luxury items will find a smoother entry into Indian markets. This balanced approach attempts to stimulate economic gains on both sides.
Tariff Reductions and Market Access
One of the central features of the India-UK Trade Agreement is tariff reduction. For instance, India has agreed to lower its current 150% tariff on Scotch whisky to 40% over a ten-year period. Similarly, tariffs on British automobiles—some of which were as high as 110%—will be brought down to 10%, but within a defined quota framework.
Consumer products like soaps, perfumes, and cosmetic items will also benefit from gradual tariff elimination, increasing their affordability in the Indian market. However, India has protected sensitive sectors by keeping products like cheese, apples, smartphones, gold bars, and electric or hybrid vehicles outside the ambit of tariff reductions for now. Similarly, the UK has excluded sensitive agricultural items such as meat, rice, sugar, and eggs from tariff concessions.
Government Procurement and Domestic Policy Concerns
A significant and potentially controversial part of the India-UK Trade Agreement involves government procurement. UK companies will now have access to bid on nearly 40,000 public sector tenders in India, valued at over £38 billion annually. Moreover, the agreement allows UK-origin products with just 20% local content to qualify as Class II suppliers in India—a status previously limited to companies with at least 50% Indian content.
This provision has triggered concerns among domestic manufacturing stakeholders. Critics argue that it could dilute initiatives like ‘Make in India’ and Atmanirbhar Bharat, which aim to promote self-reliance and reduce dependence on foreign supply chains. The lower threshold for local content might give UK firms an advantage over Indian manufacturers in public procurement.
Social Security and Workforce Mobility
The agreement also includes a Double Contributions Convention, designed to benefit Indian professionals working in the UK. It ensures that for a period of three years, Indian workers do not need to pay into both Indian and British social security systems, thereby reducing financial burden. The provision is expected to aid nearly 75,000 Indian IT and healthcare professionals currently employed in the UK.
This is a crucial win for India’s skilled workforce and contributes to enhancing professional mobility between the two nations.
Challenges and Unresolved Issues
Despite the optimism surrounding the India-UK Trade Agreement, some concerns remain unresolved. Chief among them is the UK’s proposed Carbon Border Adjustment Mechanism (CBAM), which is scheduled to come into effect in 2027. India has raised objections, arguing that it could unfairly penalize Indian exporters under the guise of climate compliance. The current version of CETA does not address this issue directly, leaving room for further negotiation.
Additionally, the phased nature of tariff cuts and product exclusions indicates that both countries are trying to balance liberalisation with domestic political and economic realities. Analysts note that while the deal is ambitious, its success will depend on robust implementation and continued dialogue to iron out any friction points.
Conclusion
The India-UK Trade Agreement sets a new benchmark in bilateral relations and opens doors for increased economic, professional, and technological collaboration. With both nations committed to strategic cooperation and mutual growth, this trade pact could serve as a template for India’s future trade negotiations with other developed economies. However, careful monitoring and adaptive policy adjustments will be essential to ensure the agreement delivers inclusive and sustainable benefits for both sides.
