India-UK CETA: Landmark Deal With A P5 Nation, & Template For EU & US Pacts

The Comprehensive Economic and Trade Agreement (CETA) between India and the UK is a significant augury for the former, as it is the first comprehensive bilateral trade agreement that has been signed with a P5 country. This agreement could serve as a template for two significant agreements that India would sign in the very near future with the EU and the US.

The Indian side is celebrating the CETA, for it provides duty-free access to 99% of the country’s exports to the UK, including labour-intensive sectors that would provide a fillip to the ‘Make in India’ initiative. There are expectations that major industries, such as textiles, marine products, leather, footwear, toys, and gems and jewellery, would be able to export more to the UK. Fast-growing sectors like engineering goods, auto components, and organic chemicals would also benefit, according to India’s assessment.

At the same time, India has made a significant concession by opening its market for passenger vehicles. However, imports from the UK would be regulated through quotas, beginning with 20,000 vehicles in the first year of implementation, going up to 37,000 in the fifth year.

India should be mindful of the fact that the projected benefits would materialise only if its businesses can overcome a range of product-process standards that are in place in the UK. Two additional standards are set to be introduced through the CETA, namely labour and environmental standards. The agreement makes it mandatory for India to enforce internationally recognised labour rights encapsulated in the Fundamental Conventions of the International Labour Organisation. As regards environmental standards, the UK is planning to introduce its Carbon Border Adjustment Mechanism (CBAM), a carbon tax on imports of carbon-intensive products. The CETA is silent over whether India’s exports are exempted from the CBAM. In other words, this is an uncertainty looming large.

The Agreement is expected to enhance mobility for Indian professionals by simplifying access for contractual service providers, business visitors, and independent professionals. The Double Contribution Convention (DCC) would exempt Indian workers and their employers from paying social security contributions in the UK for three years, which should boost competitiveness and earnings. It’s a no-brainer that the DCC would have been more helpful if the exemptions were available for a longer period.

The UK government has obvious reasons to feel elated since its businesses and workers can have preferential access to the world’s fourth-largest economy. The economic gains arising from the CETA could put the UK’s economy on a sustainable growth path. The UK’s Department of Business and Trade has estimated that UK-India bilateral trade would increase by nearly 39% in the long run, equivalent to £25.5 billion a year, and 60% of this increase would accrue to the UK. India’s businesses need to take urgent steps to ensure that this imbalance in the gains from CETA is narrowed.

Published on: Saturday, July 26, 2025, 02:04 PM IST