The unfinished business of the India-U.K. trade deal | Explained
The India-U.K. Comprehensive Economic and Trade Agreement (CETA), signed in London on 24 July 2025 and in force from 15 July 2026, eases tariffs and market access between the two countries but leaves several contentious issues for future negotiation.
The UK offered tariff liberalisation on 98.8% of tariff lines (99.5% of India's export value), while India's offer covers 89.5% of tariff lines (89.4% of trade value); the deal spans roughly 30 chapters including goods, services, digital trade, government procurement and IP.
Outstanding issues flagged include investor protection standards (a standalone bilateral investment treaty was not concluded alongside CETA), patent-related concerns raised by the pharmaceutical industry, and the UK's proposed Carbon Border Adjustment Mechanism (CBAM), for which India could not secure an exemption.
India and the UK have agreed that India retains the right to rebalance tariff concessions if the UK's CBAM ends up eroding the trade benefits India secured under CETA.
Bilateral Investment Treaties and India's 2016 Model BIT
A Bilateral Investment Treaty (BIT) is a treaty between two countries protecting investments made by investors of one country in the other, typically covering fair and equitable treatment, protection against expropriation, and investor-state dispute settlement (ISDS). India adopted a new Model BIT in 2016 after a wave of ISDS claims (including the Vodafone and White Industries cases), and has since terminated around 58 old-generation BITs.
Key Details
- The 2016 Model BIT requires investors to exhaust local remedies for five years before invoking international arbitration.
- It drops the Most-Favoured-Nation (MFN) clause found in older BITs, limiting an investor's ability to "treaty-shop" provisions from India's other BITs.
- Taxation measures are explicitly excluded from BIT protection, preserving India's sovereign taxing power.
CETA's investment chapter reportedly does not settle a standalone investment protection treaty on India's preferred 2016 Model BIT terms, leaving negotiations on investor-state dispute mechanisms for a later phase — a recurring friction point in India's post-2016 trade diplomacy.
Section 3(d) of the Patents Act, 1970 and TRIPS-Plus Provisions
Section 3(d) of India's Patents Act, 1970 bars patents on new forms of already-known substances unless they show significantly enhanced therapeutic efficacy, a provision designed to prevent "evergreening" — extending patent monopolies through minor molecular tweaks. It was upheld by the Supreme Court in the 2013 Novartis v. Union of India case involving the drug Glivec.
Key Details
- Patent protection in India otherwise runs for 20 years from the filing date, per the Patents Act, 1970 (amended 2005 for TRIPS compliance).
- "TRIPS-plus" provisions — data exclusivity, patent term extensions, patent-registration linkage — go beyond WTO's TRIPS Agreement minimum standards and are often sought by developed-country trade partners.
- CETA's IP chapter is described as one of the most comprehensive IP chapters India has negotiated, covering patents, trademarks, geographical indications, copyright and enforcement, though it has not resolved industry demands for stronger IP protections.
The pharmaceutical industry has expressed disappointment that CETA does not address long-standing demands for stronger patent protections, meaning India's Section 3(d) safeguard against evergreening remains untouched — a point of continuing negotiation rather than concession.
Carbon Border Adjustment Mechanism (CBAM)
A CBAM is a carbon tariff imposed on imports of carbon-intensive goods, designed to equalise the carbon cost between domestic producers (who pay a domestic carbon/emissions-trading price) and importers, preventing "carbon leakage." The EU's CBAM began its transitional phase in October 2023, with definitive charges from 2026; the UK's own CBAM is set to take effect from 1 January 2027.
Key Details
- The UK CBAM will cover aluminium, cement, fertiliser, hydrogen, and iron and steel — similar sectoral scope to the EU CBAM, but excluding electricity.
- EU CBAM-covered goods made up about 9.9% of India's total exports in 2022-23; at a carbon price of €100/tonne, the compliance cost has been estimated near USD 1.7 billion.
- India raised CBAM concerns during CETA negotiations, but the UK side maintained its CBAM was "not yet in existence" and hence outside the agreement's scope.
Because CBAM was excluded from CETA, India secured a rebalancing clause allowing it to withdraw tariff concessions if the UK's carbon tax (from January 2027) negates the market access gains CETA promised Indian exporters, particularly in steel and metals.
- CETA was signed on 24 July 2025 in London and entered into force on 15 July 2026.
- UK tariff liberalisation: 98.8% of tariff lines / 99.5% of India's export value; India's offer: 89.5% of tariff lines / 89.4% of trade value.
- The agreement runs to roughly 30 chapters covering goods, services, digital trade, government procurement, MSMEs, IP, labour, environment and gender.
- UK's CBAM takes effect from 1 January 2027, covering aluminium, cement, fertiliser, hydrogen, and iron and steel.