The India-UK Free Trade Agreement (FTA), officially known as the Comprehensive Economic and Trade Agreement (CETA), came into force on Wednesday after nearly three years of negotiations. The pact marks one of India’s most significant trade agreements with a developed economy after recent deals with the UAE and Australia.
The agreement is expected to strengthen economic ties between the two countries by reducing customs duties, improving market access and encouraging investment and services cooperation.
While British products such as Scotch whisky, gin and luxury automobiles are expected to become more affordable in India over time, Indian exporters are set to gain wider access to one of the world’s largest consumer markets.
According to the government, nearly 99 per cent of India’s exports to the UK by value will now receive zero-duty access. The benefits will cover sectors including textiles, apparel, leather, footwear, gems and jewellery, marine products, engineering goods, chemicals and agricultural products.
Scotch Whisky And Gin To See Gradual Duty Reduction
One of the most visible benefits for Indian consumers will be the reduction in import duties on British spirits.
At present, India imposes a 150 per cent import duty on Scotch whisky and gin imported from the UK. Under the FTA, this duty will immediately fall to 75 per cent and will gradually reduce further to 40 per cent over the next 10 years.
Industry estimates suggest that premium Scotch brands could eventually become 5-10 per cent cheaper. However, the final price reduction will depend on factors such as state excise duties, distributor margins and brand strategies.
Industry leaders believe the agreement could expand India’s premium spirits market, as imported Scotch currently represents only a small share of the country’s overall whisky consumption.
Luxury British Cars To Become More Affordable Over Time
The agreement also provides tariff benefits for British-made automobiles, although consumers will have to wait for the full impact.
Currently, imported luxury cars from the UK attract duties of up to 110 per cent. Under CETA, these duties will gradually decline to 10 per cent over 15 years.
Luxury brands such as Jaguar Land Rover, Aston Martin, Bentley, McLaren and Rolls-Royce are expected to benefit from the lower tariffs.
However, immediate price cuts are unlikely as imports will initially be restricted under a Tariff Rate Quota (TRQ) system. Only 20,000 completely built-up petrol and diesel passenger cars will qualify for concessional duties in the first year.
To protect domestic manufacturers, India has excluded lower-priced electric, hybrid and hydrogen-powered vehicles from duty reductions during the initial five years. Separate concessions for premium electric vehicles will begin later.
While the trade pact reduces duties on several products, consumers should not expect an immediate fall in prices across all imported British goods.
Items such as chocolates, cosmetics, premium food products and fashion goods may become more competitive gradually. However, retail prices will continue to depend on logistics costs, currency fluctuations, GST, distributor margins and retailer pricing.
Similarly, luxury vehicles will remain expensive despite phased tariff reductions.
Major Opportunity For Indian Exporters
Economists believe the biggest long-term gains from the agreement could come from India’s export sector.
With nearly all Indian exports receiving duty-free access to the UK market, domestic manufacturers will gain a competitive advantage over suppliers from countries that continue to face higher tariffs.
According to the Global Trade Research Initiative (GTRI), sectors with the strongest potential are those where India already has production capacity and the UK has strong import demand.
Garments are expected to benefit significantly, as India currently exports over $1.3 billion worth of apparel to Britain. Lower tariffs could help Indian exporters compete more effectively with global rivals.
Textiles, leather and footwear are also expected to gain, with the UK already accounting for a significant share of India’s footwear exports.
Processed foods, including ready-to-eat meals, sauces and ethnic food products, could see increased demand, although exporters will need to meet strict UK food safety requirements.
Seafood exports also have room for expansion, as India currently supplies less than 1 per cent of Britain’s seafood imports.
Automobiles, auto components, engineering goods, electronics and machinery are other sectors expected to benefit, although success will depend on quality standards, certifications and supply chain integration.
'Structural Challenges'
The GTRI has cautioned that tariff reductions alone may not guarantee export growth in sectors such as pharmaceuticals, chemicals, plastics, metals and petroleum products.
These industries face challenges related to regulatory approvals, technical standards, environmental requirements and certification processes.
Experts said the agreement provides market access but does not automatically create exports. Indian companies will need to improve logistics, compliance systems and buyer networks to fully utilise the opportunity.
Relief For Indian Professionals
One of the key provisions of the agreement relates to social security contributions.
Under the Double Contribution Convention, Indian professionals temporarily working in the UK and their employers will not have to contribute to social security systems in both countries.
Employees on short-term assignments can continue making contributions only in India for up to five years, reducing costs for IT companies and other service exporters.
India’s Global Trade Push
The UK imported goods worth nearly $929 billion in 2025, but India accounted for only $15.2 billion, giving it a market share of just 1.6 per cent.
The agreement provides significant room for Indian companies to expand their presence in Britain and diversify export markets.
The pact is part of India’s broader strategy of signing trade agreements with major economies to strengthen global supply chains and reduce dependence on traditional export destinations.
