Context

• India and the United Kingdom recently concluded negotiations on the Comprehensive Economic and Trade Agreement (CETA), marking India’s first FTA with a G7 country in over a decade and the UK’s largest deal since Brexit. While the deal promises significant economic and strategic gains, its real impact will hinge on effective execution and overcoming political constraints.

Background

• The India-UK Comprehensive Economic and Trade Agreement (CETA) was signed in July 2025 after negotiations since 2022.
• It marks the UK’s largest trade deal since Brexit and India’s first FTA with a G7 country in over a decade.
• The pact complements the broader India– UK Roadmap 2030, covering areas like climate action, critical minerals, and maritime security.
• Seeks to deepen ties with post-Brexit UK and support India’s “Make in India for the World” vision.

Free Trade Agreements

• Comprehensive trade arrangements between two or more countries designed to reduce or eliminate trade barriers such as tariffs, quotas, and import/export restrictions.
• These agreements aim to provide preferential market access by offering tariff concessions and easing non-tariff barriers

Key Features

• Cover trade in both goods (agricultural and industrial) and services (e.g., banking, IT, construction).  
• Advanced FTAs may also include provisions on: Investment, Intellectual Property Rights (IPRs), Government procurement & Competition policy

India UK FTA Features

• UK to eliminate tariffs on 99% of Indian exports — includes textiles, leather, pharma, gems, marine products.
• India to cut average duties on British goods from 15% to 3% on 90% of tariff lines.
• Scotch whisky: from 150% to 75% immediately, 40% in 10 years.  
• High-end British cars: from 100%+ to 10% (quota of 25,000 units).  
• Salmon, chocolates, cheese to face near-zero tariffs.
• Investment & export gains: UK Treasury projects £4.8 billion GDP rise by 2040.
• Indian Commerce Ministry projects $34 billion bilateral trade growth in 5 years.

Challenges Highlighted 

• Mobility Framework: India’s push for a liberal “Mode 4” to ease IT professional movement not accepted; domestic immigration concerns in UK.
• Sectoral Disappointments: British legal/financial services lack preferential access. Indian agri-exports still face sanitary and phytosanitary (SPS) barriers.
• Pending Investment Treaty: Investor-State Dispute Settlement (ISDS) mechanism yet to be finalised. 
• Regulatory & Political Delays: Parliamentary scrutiny in Westminster and Cabinet nod in Delhi still pending. Domestic lobbies may seek sectoral exemptions.
• Environmental Trade Barriers: India not exempted from UK's Carbon Border Adjustment Mechanism (CBAM) — carbon-intensive Indian exports may face future tariffs.

Way Forward

• Subnational Engagement: States like Gujarat, Maharashtra should design targeted incentive frameworks to access UK procurement.
• Digital Trade & Data: Explore a digital trade protocol that integrates UK fintech with India Stack, pending data localisation reforms.
• Trade Balance & Political Optics: Monitor impact on India’strade deficit if imports like whisky and luxury cars surge.
• Ensure Robust Implementation: Efficiency in ratification and execution key to realising gains. Resist domestic protectionist pressures that may dilute the liberalising agenda.
• Finalize Investment Treaty: Expedite BIT negotiations to provide legal certainty to investors on both sides.