India-UK trade pact to boost agri, auto exports with lower tariffs, better market access: Experts
Experts assessed that the India-UK Comprehensive Economic and Trade Agreement (CETA) will boost India's agricultural, processed food, and automotive exports through reduced tariffs and improved market access
Tariffs of up to 70% on select processed food products entering the UK are being reduced to zero, improving India's price competitiveness against suppliers from countries without a free trade agreement with the UK
UK tariffs on Indian automobiles (up to 18%) are being eliminated for most vehicle categories, while duties on auto components are being cut to nil from the existing 2–4%
India's import duties on passenger vehicles from the UK will decline gradually over a fifteen-year phase-in period, rather than immediately
The agreement is expected to support export diversification and improve India's competitiveness relative to countries lacking a UK trade pact
India-UK CETA — Structure and Timeline
CETA is a Comprehensive Economic and Trade Agreement, a broader category of free trade agreement (FTA) covering goods, services, investment, and related regulatory cooperation, going beyond a narrower FTA that may cover only tariff lines on goods. India-UK CETA negotiations began in January 2022, were concluded in May 2025, formally signed in London in July 2025, and entered into force on 15 July 2026.
Key Details
- Around 99% of India's exports to the UK are set to enter duty-free under the agreement; roughly 90% of UK goods entering India will see tariff elimination or reduction
- A companion Double Contribution Convention (DCC) on social security was signed separately (February 2026), exempting workers on temporary cross-border assignments from paying social security contributions in both countries
- Sensitive Indian sectors — dairy, cereals, millets, edible oils, oilseeds, apples, and several vegetables — were kept outside the tariff concessions to protect domestic farmers
- Distinguishes from a Comprehensive Economic Partnership Agreement (CEPA, e.g., India-UAE, 2022) — CETA and CEPA are functionally similar broad-based agreements; the terminology varies by treaty naming convention rather than legal category
The tariff cuts described in the report are provisions that took effect under CETA's entry into force in July 2026; the phased reduction structure (immediate for most goods, 15-year glide path for passenger vehicles) reflects the negotiated balance between opening India's market and protecting sensitive domestic industries.
Tariff Rate Quotas (TRQs) and Rules of Origin
A Tariff Rate Quota allows a fixed quantity of a good to be imported at a lower (or zero) tariff, with any imports beyond that quota facing the standard, higher tariff rate — used to grant limited market access without fully exposing a sensitive sector to unrestricted competition. Rules of Origin determine which goods qualify for preferential tariff treatment under the FTA, preventing simple trans-shipment of third-country goods to claim benefits.
Key Details
- Passenger vehicles (including electric and hybrid vehicles) from the UK face a TRQ arrangement rather than full immediate liberalisation, and India's duties on these fall gradually over roughly 15 years
- Auto components (rather than finished passenger vehicles) see a fuller and faster tariff cut, from about 2–4% to nil, benefiting India's auto component manufacturing and export base
- Rules of origin requirements ensure that goods claiming CETA preferences have sufficient value addition or manufacturing undertaken in India or the UK
The distinction between "UK tariffs on Indian automobiles eliminated" (a general benefit for Indian exporters into the UK) and "India's duties on passenger vehicles declining over fifteen years" (India's own protective glide-path for its domestic auto industry against UK imports) reflects the asymmetric, sector-specific design typical of FTA tariff schedules.
Free Trade Agreements and India's Trade Diversification Strategy
India has pursued a series of bilateral FTAs/CEPAs (UAE 2022, Australia ECTA 2022, EFTA TEPA 2024, UK CETA 2026) as part of a strategy to diversify export markets, reduce dependence on any single destination, and improve competitiveness relative to countries that already enjoy preferential access to those markets.
Key Details
- India-UK bilateral trade was a key driver for the agreement, with the UK government's own assessment estimating a rise in bilateral trade value and a modest addition to UK GDP by 2040 as a result of the deal
- Processed food and agri-exports benefit particularly from "preference erosion" reversal — where competitors with existing UK FTAs (e.g., under EU-UK or CPTPP-linked deals) previously had a tariff advantage over India that CETA now removes
- Auto component trade complements India's Production Linked Incentive (PLI) scheme for automobiles and auto components, which aims to boost manufacturing scale and export competitiveness
The "boost to price competitiveness against non-FTA suppliers" cited by experts is a textbook FTA effect — Indian exporters, previously facing the same UK tariff as competitors without any UK trade deal, now gain a preferential-tariff edge in agri and auto-component categories.
- India-UK CETA entered into force: 15 July 2026 (signed July 2025; negotiations began January 2022)
- Share of India's exports to UK becoming duty-free: approximately 99%
- Share of UK goods entering India seeing tariff cuts/elimination: approximately 90%
- UK tariffs on Indian auto components: cut from 2–4% to nil
- UK tariffs on most Indian automobiles: cut from up to 18% to nil (passenger vehicles under TRQ)
- India's import duty phase-down on UK passenger vehicles: gradual reduction over 15 years
- Processed food tariffs (UK side) reduced: from up to 70% to zero for eligible products
- Sensitive sectors excluded from India's tariff concessions: dairy, cereals, millets, edible oils, oilseeds, apples, select vegetables