India-UK Sign Landmark CETA: Key Gains, Tariff Concessions, and Sectoral Impact Explained

New Delhi, July 25 – India and the UK have signed a Comprehensive Economic and Trade Agreement (CETA), marking a significant development in international trade and paving the way for similar strategic and comprehensive agreements with other major economies. The deal is considered one of the most ambitious bilateral trade treaties India has ever signed. CETA spans 26 sectors and marks a major policy shift, as the two countries agreed to introduce first-of-its-kind provisions related to lowered tariffs, technology sharing, gender equality, and intellectual property.

The agreement is designed to double bilateral trade between the two nations from USD 56 billion to USD 112 billion, significantly boosting India’s export footprint in the UK while offering British firms broader access to Indian markets.

Major Benefits to India

In FY2025, India exported goods worth USD 14.5 billion to the UK. Under CETA, approximately USD 6.5 billion, or 45 percent of these exports, will now enter the UK duty-free. Key beneficiaries include textiles, footwear, carpets, automobiles, seafood, and fruits like grapes and mangoes. These products earlier faced tariffs ranging from 4 to 16 percent. This will provide a significant boost to Indian export-oriented manufacturers and MSMEs operating in various sectors.

An additional USD 8 billion in exports, including petroleum, pharmaceuticals, and diamonds, already enjoyed zero-duty access under existing MFN rules. The UK will now eliminate tariffs on nearly all Indian exports, except for a few agricultural items, such as rice.

UK’s Gains Under CETA

The UK, which exported USD 8.6 billion in goods to India in FY2025, faced tariffs on over 94% of its items. Under the new pact, India will eliminate duties on 90 percent of UK goods in a phased manner.

Immediately, 64 percent of UK exports-such as salmon, lamb, aircraft parts, electronics, and machinery—will become duty-free. Another 26 percent, including chocolates, soft drinks, cosmetics, and auto parts, will see phased tariff reductions over the next decade. Notably, India will also eliminate duties on medical devices and gradually reduce tariffs on silver imports (USD 2.1 billion in FY2025) to zero over a period of 10 years.

Auto Sector Tariff Reductions

For the first time in any free trade agreement, India has agreed to reduce tariffs in the auto sector. A dedicated Tariff Rate Quota (TRQ) will allow UK-built passenger cars to enter India at significantly lower duties. However, this comes with a capping (in terms of the number of cars).

• Luxury cars (above 3000 cc petrol or 2500 cc diesel) will see tariffs drop from over 100 percent to 10 percent over 15 years, within a quota of up to 19,000 units by year five.
• Mid-sized cars (1,500–2,500 cc diesel / up to 3,000 cc petrol) will attract an initial 50 percent duty, falling to 10 percent by year five.
• Small cars will follow a similar path, with growing quotas and reduced in-quota duties.

Out-of-quota imports will continue to face high tariffs of 50 to 95 percent, depending on vehicle category and timeline.

Alcohol Sector Tariff Concessions

UK-origin alcoholic beverages such as whisky, rum, vodka, liqueurs, and cider currently face a 150 percent base customs duty. Under CETA, these duties will drop to 75 percent over 10 years, subject to a Minimum Import Price (MIP) of USD 5 per litre (or USD 6 per 750 ml bottle).

This measure is designed to protect India’s domestic liquor market from low-cost imports while making premium UK spirits more competitive.

Excluded Products

India has excluded several sensitive products from tariff reductions, including:

• Fresh apples
• Walnuts
• Blue-veined cheese
• Whey and modified whey
• Select seed categories
• Gold bars
• Smartphones

The UK has excluded meat products, egg-based items, milled rice, and solid forms of cane or beet sugar.

Government Procurement: A First for India

For the first time, India has opened up its government procurement market to a foreign country. UK suppliers will have access to approximately 40,000 high-value contracts across various sectors, including transport, green energy, and infrastructure, particularly from central government ministries and departments.

Intellectual Property Rights (IPR) Chapter

India has made significant concessions in the IPR chapter, agreeing to language that limits its ability to issue compulsory licenses. The pact includes explicit reference to ensuring “adequate remuneration” to patent holders, aligning with WTO’s TRIPS Article 31(h), as noted by think tank GTRI.

Services Sector Access

India has opened key service sectors to the UK:

• Accounting and auditing
• Financial services (with FDI in insurance capped at 74 percent)
• Telecom (100 percent FDI allowed)
• Environmental services
• Auxiliary air transport services

In return, the UK will allow Indian firms to have a commercial presence in the computer services, consultancy, and environmental sectors. It has also committed to offering 1,800 visas annually to professionals such as yoga instructors and classical musicians.

Double Contribution Convention (DCC)

The DCC agreement will benefit over 75,000 Indian professionals working in the UK on short-term assignments, allowing them to contribute only to India’s social security system and avoid dual payments.

No Relief on UK Carbon Tax

India was unable to secure a carve-out from the UK’s Carbon Border Adjustment Mechanism (CBAM). This means Indian exports of steel and aluminium may face additional carbon taxes from January 2027, despite the UK gaining near-complete tariff-free access to India.

Current India-UK Trade Snapshot

In FY2025, total bilateral trade reached USD 54.9 billion, with India posting a USD 11.7 billion surplus. Goods exports totaled USD 14.5 billion, while services exports reached USD 18.4 billion. UK goods imports into India totalled USD 8.6 billion, and services imports totalled USD 12.6 billion.

The UK remains India’s second-largest IT and business services market after the US.

India’s Key Exports and Imports

Top Exports to the UK:

• Smartphones (USD 1.48 billion)
• Aviation turbine fuel (USD 1.29 billion)
• Pharmaceuticals
• Basmati rice
• Diamonds and steel products
• Cotton garments and gold jewellery

Top Imports from the UK:

• Gold bars (USD 2.1 billion)
• Turbo-jets
• Aluminium scrap
• Electronics and telecom equipment
• Whisky and other alcoholic beverages
• Machinery parts and valves

India’s landmark CETA with the UK is expected to unlock new opportunities across various sectors, despite some compromises in areas such as IPR and carbon taxation.

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