Elizabeth Roche
India and the United Kingdom signed a landmark trade pact, the Comprehensive Economic and Trade Agreement (CETA), during Prime Minister Narendra Modi’s visit on July 23-24. The pact opens a new chapter in bilateral economic relations against the backdrop of rising geopolitical uncertainty and economic flux stemming from the U.S. announcement of unilateral tariffs.The agreement, which contains almost 30 chapters, has been described as “forward-looking” and the “largest” India has negotiated in terms of complexity and depth. It covers trade in goods and services, telecommunications, digital trade, financial and professional services, labor mobility, environment, and social issues like labor rights and development cooperation, as well as support for small and medium enterprises.
Hailing the agreement as a “blueprint for shared prosperity,” Modi said that it would reduce the “cost of doing business” and enhance “confidence of doing business” between the two economies, even as it strengthens the global economy.U.K. Prime Minister Keir Starmer described the CETA as “historic” and pointed out that it would “boost wages and living standards” in the two countries. “It will bring down the prices of Indian clothes, shoes, foods for British citizens,” he said.
The agreement with the U.K., the world’s sixth-largest economy, is particularly significant for India as its pacts with two other major developed economies, the U.S. and the European Union (EU), are still under negotiation. The CETA could therefore serve as the template in these negotiations.In addition, India’s deal with the U.K. would help undercut arguments that paint India — the world’s fourth largest economy — as isolationist or obstructive when it comes to trade matters. U.S. President Donald Trump has frequently called India a “tariff king” – a scathing commentary on what he views as India’s high tariffs protecting its domestic markets and industries.
Days after the CETA was signed, Indian Commerce Secretary Sunil Barthwal pointedly said that India was capable of facing competition and was not a “tariff king,” with average tariffs for the U.K. set to drop to 3 percent from the current 15 percent.With India’s economic profile rising, the Indian government would like to be seen as trade-friendly, welcoming of investors, and an easier place to do business. India’s budget 2025-26 contained a slew of measures, including the setting up of a new committee to review regulatory reforms in the non-financial sector with the aim of strengthening trust-based economic governance to improve ease of doing business.
Discussions for a pact between India and the EU began in 2007. But they floundered in 2013, and it was only in 2022 that negotiations were resumed.
Meanwhile, India began trade discussions with the U.S. during Trump’s first term in office (2017-2021). Talks resumed after Trump returned to the White House in January 2025.
India’s trade with the U.S. in 2024 totaled almost $130 billion; trade with the EU was $155 billion (132 billion euros) during the same period. With the U.K., India’s bilateral trade is about $56 billion, with both countries pledging to double this number by 2030.
With the deal with the U.K. in the bag, India now has 16 trade agreements in place, including those with Australia and the United Arab Emirates.
A closer look at the CETA reveals that India has managed to protect its interests while exhibiting flexibility to accommodate demands from the U.K. An Indian government statement said that the CETA provides for the elimination of almost 99 percent of tariff lines, accounting for almost the entire value of Indian exports to the U.K. It will significantly enhance market access and boost the competitiveness of Indian textiles, marine products, leather, footwear, sports goods, toys, gems and jewelry, besides fast-growing sectors like engineering goods, auto components, and organic chemicals. Most of these sectors are labor-intensive, employing millions of workers.
By securing zero duties in these areas, India has ensured its exports remain competitive. For instance, in the case of textiles, the CETA guarantees that Indian exports retain their advantage vis-à-vis those from other textile-exporting nations like Bangladesh or Vietnam.
Analysts have pointed out that finding an alternative market for Indian marine products, including shrimps, in the U.K. through the CETA means that India is ringfencing this sector from future economic and political shocks that could come its way from markets like China. Given India’s mostly tense ties with Beijing, finding alternative markets is an imperative that the CETA addresses. Dairy products and edible oils have been kept out of the ambit of the pact, while almost all of Indian agricultural products and processed food items will now have zero import duties when entering the U.K. market. This protects India’s sensitive farm sector — agriculture and allied activities that contribute to 16 percent of India’s GDP and support 46 percent of the population, according to Indian Finance Ministry data.
A second key feature of the CETA is that India has agreed to loosen controls that will allow U.K. firms into its previously closely guarded government procurement market. British companies will be free to bid for 40,000 Indian government contracts worth about $40 billion, provided the firms fulfil a 20 percent local content sourcing criterion. This move aligns India with global norms on public procurement. However, certain sectors like defense and agriculture remain outside the ambit of the CETA.
India has also committed to greater transparency by agreeing to publish information related to procurement on government portals. Some strategic sectors, like defense, are out of the purview of this, but still, the move is seen as a significant gesture toward the United Kingdom.
The CETA does not exempt India from the U.K.’s Carbon Border Adjustment Mechanism (CBAM), which aims to tax carbon-intensive products. This could affect India’s exports of iron, steel and fertilizers. India has said it would retaliate should the U.K. impose this measure from early 2027.
The pact also provides for increased mobility of Indian professionals by simplifying access requirements and allowing easier movement of contractual service providers, business visitors and independent professionals.
A separate Double Contributions Convention that was signed alongside the CETA will eliminate the need for Indians in the U.K. to pay social security contributions in both countries, simultaneously, for a period of three years. This is expected to benefit some 75,000 Indians working in the U.K.
Analysts Nisha Taneja and Nirlipta Rath of the New Delhi-based Indian Council for Research on International Economic Research have said that CETA sets “a progressive benchmark for the country’s future trade negotiations.”
According to Bidisha Bhattacharya, a senior research consultant at the Chintan Research Foundation, the signing of the CETA is “not a retreat from protectionism but a recalibration of India’s trade strategy.” It involved using strategies like phased liberalization, minimum pricing thresholds, and value addition rules. By doing so, “India is carefully walking the line between global integration and domestic resilience,” Bhattacharya wrote in a recent article. This was not India embracing multilateralism offered on unfavorable terms but India seeking bilateral agreements with high-income economies that offered reciprocal access, she pointed out.
With the World Trade Organization looking increasingly irrelevant and dysfunctional, it’s natural for countries to look for bilateral or regional arrangements that secure their access to key global markets. Though it is a late entrant, India seems to be learning to play the game, albeit slowly.Authors

Contributing Author
Elizabeth Roche
Elizabeth Roche is Associate Professor at the Jindal School of International Affairs, OP Jindal Global University, Haryana, India.View ProfileTagsThe Pulse
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