Explained: India-UK Comprehensive Economic and Trade Agreement

New Delhi: India inked a Comprehensive Economic and Trade Agreement (CETA) with the UK on July 24. It is the country's most ambitious trade agreement till date, covering 26 sectors from tariffs to technology.

The pact has many things which were agreed upon by India for the first time, including slashing of import duties on automobiles, and inclusion of chapters like Trade and Gender Equality. It covers areas such as tariffs, services, digital trade, intellectual property, and government procurement.

CETA is India's 16th and one of its most wide-ranging trade agreements. The pact is aimed at doubling bilateral trade in goods and services to USD 112 billion from USD 56 billion at present. It is essential to understand the main advantages of the CETA for Indian businesses.

Following is the list of Q& As (questions and answers) to explain these issues:

Q. What are the major gains to India?

In FY2025, India exported USD 14.5 billion worth of goods to the UK. With the new deal, USD 6.5 billion or 45 per cent of Indian exports like textiles, footwear, carpets, automobiles, seafood, and fresh fruits such as grapes and mangoes, will enter the UK duty-free, down from earlier tariffs of 4 per cent to 16 per cent.

The remaining USD 8 billion, covering petroleum, pharmaceuticals, diamonds, and aircraft components, already had zero duty access (Zero MFN tariffs) even without this pact. The UK has agreed to eliminate tariffs on all Indian goods, with only a few agricultural items like rice excluded.

Q. What are the major gains to the UK?

The UK's USD 8.6 billion exports to India face tariffs on over 94 per cent of items. Under the agreement, India will eliminate tariffs on 90 per cent of UK goods. Tariffs on 64 per cent of British goods will be eliminated immediately, including salmon, lamb, aircraft parts, machinery, and electronics.

Another 26 per cent, including chocolates, soft drinks, cosmetics, and auto parts, will see tariffs phased out over the next 10 years.

For cosmetics like soaps, perfumes, shaving creams, and nail polish, current tariffs of 10-20 per cent will either be eliminated on day one or gradually phased out. India will also remove duties on medical devices from the UK.

India will cut tariffs on silver, the largest import item from the UK (USD 2.1 billion in FY 2025) to zero in 10 years.

Q. What duty concessions will India give in the auto sector to Britain?

India, for the first time, has given tariff concessions for the auto sector in its free trade agreement, and it's likely to trigger similar demands from Japan, the EU, South Korea, and the US. India has opened a dedicated Tariff Rate Quota (TRQ) for passenger cars from the UK. For large-engine petrol cars above 3000 cc and diesel cars over 2500 cc, traditionally luxury imports, India has committed to lowering the current over 100 per cent customs duty to 10 per cent over 15 years, within a quota starting at 10,000 units and rising to 19,000 in year five.

For mid-sized cars (1500-2500 cc diesel / up to 3000 cc petrol), a 50 per cent in-quota duty applies initially, falling to 10 per cent by year five. Small cars under 1500 cc follow a similar tariff reduction path with a growing quota. These in-quota vehicles enjoy sharply reduced duties, while out-of-quota imports still face tariffs ranging from 95 per cent to 50 per cent, depending on vehicle size and year.

The TRQ marks a major policy shift, especially as India has long used high tariffs to protect its domestic automotive industry. By year five, up to 37,000 UK-built ICE (internal combustion engine) vehicles could enter India annually at just 10 per cent duty, far below the current 110 per cent.

Q. What kind of duty concessions is India giving in the alcohol sector to the UK?

India allows duty cuts for UK-origin alcoholic including whisky, brandy, rum, vodka, liqueurs, mead, cider, and tequila.

These products, which currently face a base customs duty of 150 per cent, will see steep reductions but only if they meet a Minimum Import Price (MIP) threshold of USD 5 per litre or USD 6 per 750 ml bottle.

For qualifying imports, the duty will be gradually lowered from 110 per cent in the first year to 75 per cent by year 10, through equal annual reductions.

This design helps shield India's domestic liquor market from low-cost imports while giving premium UK spirits a competitive edge.

The deal includes provisions for inflation adjustment of the MIP every 15 years and requires joint review by both governments before any indexation is applied.

Q. What are the products for which there will be no duty cuts?

India has excluded several high-sensitivity agricultural products from any tariff concessions. This includes fresh apples, walnuts, whey and modified whey, blue-veined cheese, and specific seed categories, gold bars, and smartphones.

The UK exclusion list includes various meat products, egg-based items, semi-milled or fully milled rice, and solid-form cane or beet sugar.

Q. What are the provisions under the government procurement chapter?

India has granted unprecedented market access to UK suppliers in the government procurement (GP) chapter, a major shift from its traditionally protectionist approach. For the first time, India will open about 40,000 high-value contracts from central ministries and departments in sectors such as transport, green energy, and infrastructure to UK bidders.

Q. Has India granted any concessions in the Intellectual Property Rights chapter?

According to think tank GTRI, in a significant concession, India has accepted language in the Intellectual Property chapter of the FTA that subtly curtails its ability to issue compulsory licences, a critical tool for accessing life-saving technologies during emergencies.

"For the first time in any trade agreement, India has explicitly agreed to wording that stresses the need for "adequate remuneration" to patent holders, aligning with WTO's TRIPS Article 31(h)," GTRI has said.

Q. What are the concessions given in the services sector?

India has opened key segments of its services economy to British firms, granting access in sectors such as accounting, auditing, financial services (with FDI in insurance capped at 74 per cent), telecom (allowing 100 per cent FDI), environmental services, and auxiliary air transport.

The UK is granting commercial presence rights in sectors like computer services, consultancy, and environmental services. It has offered an annual quota of 1,800 visas for niche roles like yoga instructors and classical musicians.

Q. What is the Double Contribution Convention (DCC) agreement?

It allows over 75,000 Indian workers on short UK assignments to continue paying into India's social security system without dual contributions.

Q. What is there in the FTA on UK's carbon tax?

GTRI has stated that by not securing a carve-out or exemption clause on CBAM, India lost a vital opportunity to protect its carbon-intensive exports.

From January 2027, the UK can impose carbon taxes on Indian steel and aluminium, even as we grant UK goods duty-free access.

Q. What is the trade between India and the UK?

In FY 2025, India's trade with the UK reached USD 54.9 billion, with India enjoying a USD 11.7 billion surplus. India exported USD 14.5 billion in goods and USD 18.4 billion in services, while imports from the UK were USD 8.6 billion in goods and USD 12.6 billion in services.

The UK is also India's second-largest IT and business services market, after the US.

Q. What are India's key exports to the UK?

In FY2025, India's top exports to the UK were dominated by smartphones, which brought in USD 1.48 billion, followed by aviation turbine fuel at USD 1.29 billion, highlighting India's strength in electronics and refined energy.

The other major goods include pharmaceutical formulations, gold bars, and metallurgical-grade chemicals like aluminium oxide, basmati rice, cut and polished diamonds, steel products, construction machinery parts, cotton garments, and gold jewellery.

Gold bars topped India's imports from the UK at USD 2.1 billion, making it the single largest item. This was followed by turbo-jets used in aviation, aluminium scrap, telecom and electronic equipment. The other imports include blended alcoholic beverages like whisky, scrap paper, copper scrap, and various machinery parts and valves.