New trade pact a win-win for India and U.K.
The India-United Kingdom Comprehensive Economic and Trade Agreement (CETA), signed on 24 July 2025, formally entered into force on 15 July 2026 after both countries completed domestic ratification procedures.
The agreement is assessed to reshape bilateral trade and investment flows, with the potential to generate quality jobs and shift India toward a more competitive, innovation-driven economy.
CETA is India's most comprehensive trade agreement with a G7 economy, running to around 30 chapters covering goods, services, investment, government procurement, digital trade, intellectual property, labour, environment and gender-related provisions.
The pact aims to nearly double bilateral trade in goods and services, from close to USD 56 billion currently to a targeted USD 112 billion by 2030.
Comprehensive Economic and Trade Agreement (CETA) as a trade instrument
A CETA is a deep-integration bilateral trade agreement that goes beyond a conventional Free Trade Agreement (FTA) by covering not just tariff elimination on goods but also services, investment, government procurement, intellectual property and regulatory cooperation. India distinguishes its trade pacts by depth: a basic FTA/PTA covers only tariff concessions on goods; a Comprehensive Economic Partnership Agreement (CEPA) or CETA additionally covers services and deeper regulatory chapters. Under WTO rules, such preferential agreements are permitted as an exception to the Most Favoured Nation (MFN) principle via Article XXIV of GATT 1994, provided they cover "substantially all trade" between the parties.
Key Details
- CETA entered into force on 15 July 2026, granting zero-duty access to nearly 99% of India's exports to the UK by value.
- India cut duties on Scotch whisky and gin from 150% to 75% on Day 1, staged down to 40% by Year 10; automobile tariffs fall from over 100% to 10% under a quota.
- A companion Double Contribution Convention (social security agreement) also took effect the same day, letting employees on temporary cross-border assignments contribute to only their home country's social security system for up to three years.
The CETA is presented as restructuring India's trade relationship with a developed G7 economy, moving beyond a simple tariff-cutting FTA toward a comprehensive framework covering investment, procurement and mobility, which is expected to influence competitiveness and job creation.
India's Free Trade Agreement strategy and trade diversion/creation
India's post-2021 "fast-track" FTA strategy produced agreements with the UAE (CEPA, signed February 2022, in force May 2022 — India's first deep FTA with any country in over a decade), Australia (ECTA, 2022) and now the UK. Economically, such agreements are evaluated using the concepts of trade creation (efficient producers within the bloc replace less efficient domestic production) and trade diversion (imports shift from an efficient non-member to a less efficient member due to tariff preference) — a framework originating from economist Jacob Viner's customs union theory.
Key Details
- India-UAE CEPA (2022) was India's first comprehensive trade pact with a developed/Gulf economy in the recent cycle; India-Australia ECTA followed the same year.
- India-UK CETA is described as India's most ambitious agreement to date, covering 26 sectors from tariffs to technology and services.
- Rules of Origin, set out in a dedicated CETA chapter, determine which goods qualify for preferential tariff treatment, preventing route-through by third-country goods.
The op-ed frames CETA as part of a deliberate strategy of graduated trade liberalisation, positioned to create trade creation effects (efficiency-driven job growth) in export-oriented and innovation sectors rather than simple tariff arbitrage.
Non-tariff barriers and regulatory cooperation in deep trade agreements
Beyond tariffs, deep agreements like CETA include regulatory cooperation chapters (technical barriers to trade, sanitary and phytosanitary standards, mutual recognition of conformity assessment) intended to reduce non-tariff barriers that otherwise persist even after duties are cut. These provisions matter because non-tariff barriers — technical standards, licensing, customs procedures — are increasingly the dominant constraint on market access in modern trade, more so than tariffs themselves.
Key Details
- CETA includes chapters on technical regulation, standards, government procurement access (opening UK public procurement to Indian IT, construction and medical-sector firms), and small and medium enterprises.
- India's average applied tariff remains comparatively high among major economies, making tariff and non-tariff simplification central to competitiveness gains from such pacts.
The assessment that CETA can drive India toward a more competitive, innovation-driven economy rests substantially on these regulatory-alignment chapters, not tariff cuts alone.
- CETA signed: 24 July 2025; entered into force: 15 July 2026.
- Target: bilateral trade in goods and services to double from about USD 56 billion to USD 112 billion by 2030.
- Zero-duty access on nearly 99% of India's exports to the UK by value.
- Scotch whisky/gin tariff cut from 150% to 75% immediately, tapering to 40% over 10 years; auto tariffs cut from over 100% to 10% (quota-bound).