India-UK FTA kicks in Wednesday, giving most labour-intensive exports zero-duty access
The India-UK Comprehensive Economic and Trade Agreement (CETA) came into effect on 15 July 2026, giving Indian exporters duty-free access to the UK market across most labour-intensive sectors.
Textiles, leather and footwear, marine products, and engineering goods are expected to gain the most in export competitiveness from zero-duty entry into the UK.
In return, the UK secured phased tariff reductions on exports to India, including automobiles and Scotch whisky, along with improved market access for UK professionals and service providers.
Indian professionals and service providers also gained improved access to the UK market under the agreement's services chapter.
Exporters have been advised that sustained gains depend on meeting the UK's product quality and technical standards, not just on lower tariffs.
Generalised System of Preferences (GSP) and Why Bilateral FTAs Matter More
The GSP is a unilateral, non-reciprocal tariff preference that developed countries extend to developing countries under the WTO's "Enabling Clause" (1979) — itself an exception to the Most-Favoured-Nation (MFN) principle in GATT Article I. Because GSP benefits are granted unilaterally, they can be withdrawn without negotiation, unlike tariff concessions locked into a bilateral treaty such as CETA.
Key Details
- The United States terminated India's GSP designation with effect from 5 June 2019, after review findings that India had not provided "equitable and reasonable" market access in sectors such as dairy and medical devices; roughly USD 5.6 billion of Indian exports lost preferential duty treatment.
- Affected sectors after the 2019 US GSP withdrawal included plastics, iron and steel articles, textiles, and auto parts — the same broad categories now gaining committed, treaty-bound access under India-UK CETA.
- Unlike GSP, FTA tariff schedules are binding international treaty commitments that cannot be withdrawn unilaterally without following the agreement's exit/renegotiation clauses.
CETA converts what would otherwise be discretionary, revocable UK tariff preferences into contractually locked-in zero-duty access for textiles, leather, and engineering goods — precisely the durability that unilateral schemes like GSP lack.
GATS Modes of Supply — Mode 4 and Professional Mobility
Trade in services is classified by the WTO's General Agreement on Trade in Services (GATS, 1995) into four modes: Mode 1 (cross-border supply), Mode 2 (consumption abroad), Mode 3 (commercial presence), and Mode 4 (movement of natural persons/temporary presence of service suppliers). Mode 4 is the mode most relevant to Indian professionals seeking short-term work access abroad.
Key Details
- Mode 4 commitments are typically the most restrictive category in any FTA's services chapter, as they intersect with a partner country's domestic immigration and labour-market rules.
- India's FTA negotiating priority in developed-country deals (UK, EU, Australia) has consistently centred on improving Mode 4 access for its IT and professional services exporters, given India's comparative advantage in skilled-services trade.
- CETA's improved access for Indian professionals and service providers falls under this Mode 4 framework, alongside a parallel Double Contribution Convention exempting short-term assignees from double social security payments.
The "improved access for Indian professionals and service providers" secured under CETA is a Mode 4 commitment — a category India has sought in successive FTAs precisely because services, not just goods, are a major and growing part of its export competitiveness.
RoDTEP — India's WTO-Compliant Export Incentive Framework
The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, operational since 1 January 2021, refunds embedded central, state, and local duties/taxes on exports that are not otherwise creditable under GST — such as electricity duty, mandi tax, and fuel used in transportation. It replaced the Merchandise Exports from India Scheme (MEIS) after a WTO dispute panel ruled MEIS and related schemes were prohibited export subsidies inconsistent with the WTO's Agreement on Subsidies and Countervailing Measures.
Key Details
- RoDTEP rates range roughly between 0.01% and 4.3% of the FOB export value across nearly 8,555 tariff lines, refunded as transferable electronic scrips usable against basic customs duty.
- RoDTEP is a domestic remission mechanism and operates independently of any FTA; it complements — rather than duplicates — the tariff preferences negotiated under agreements like CETA.
- Labour-intensive sectors highlighted in CETA (textiles, leather, marine products) are also significant beneficiaries of RoDTEP remission rates, layering domestic tax remission on top of the new zero-duty UK market access.
Realising the "duty-free access" promised by CETA also depends on India's parallel WTO-compliant export support architecture (RoDTEP) to keep exporters cost-competitive on the production side, since CETA only addresses the importing country's border tariff.
Technical Barriers to Trade (TBT) and Sanitary/Phytosanitary (SPS) Standards
Even where a tariff is reduced to zero, exports can still be blocked by non-tariff measures — technical regulations, standards, and conformity assessment procedures governed by the WTO's TBT Agreement, and food/plant/animal-health measures governed by the SPS Agreement. FTAs increasingly include dedicated TBT/SPS chapters providing for regulatory cooperation and mutual recognition to prevent tariff gains from being offset by compliance barriers.
Key Details
- The TBT Agreement (1995, under WTO) requires that technical regulations not create "unnecessary obstacles to trade" and encourages the use of international standards.
- The SPS Agreement governs measures to protect human, animal, or plant life — commonly invoked for agricultural and food exports such as India's marine and processed food products.
- India's Bureau of Indian Standards (BIS) and Quality Control Orders (QCOs) are the domestic-side counterpart — exporters must also meet destination-country (here, UK) conformity assessment and labelling requirements to actually realise tariff-free access.
The advisory that Indian exporters must meet "stringent quality standards" for sustained UK export growth reflects the TBT/SPS reality that zero tariffs alone do not guarantee market access — regulatory and quality compliance is the binding constraint for many labour-intensive sectors.
- India-UK CETA entry into force: 15 July 2026 (signed 24 July 2025; agreement in principle reached 6 May 2025)
- Labour-intensive sectors gaining zero-duty UK access: textiles, leather and footwear, marine products, engineering goods, gems and jewellery
- UK tariff liberalisation under CETA: about 99% of Indian tariff lines get duty reductions/elimination
- US GSP withdrawal from India: effective 5 June 2019; ~USD 5.6 billion of exports lost preferential treatment
- RoDTEP scheme: operational since 1 January 2021; remission rates ~0.01%-4.3% of FOB value across ~8,555 tariff lines
- GATS Mode 4: covers temporary movement of natural persons supplying services — the category under which Indian professional mobility gains fall
- UK to see phased Indian tariff reductions on autos and Scotch whisky under CETA