India-UK trade: From market access to market success

The UK is eliminating tariffs on about 99 per cent of tariff lines, covering nearly the entire value of India’s exports

Trade agreements are usually celebrated when they are signed. Economics suggests that another date matters more: the day firms begin using them. The India-UK Comprehensive Economic and Trade Agreement (CETA), which entered into force on July 15, 2026, should therefore be viewed not as the conclusion of a negotiation, but as the beginning of an institutional test.

The agreement is substantial. Negotiations began on January 13, 2022, and the pact was signed on July 24, 2025, after more than 3 years of negotiations. Bilateral trade in goods and services reached nearly £48 billion in 2025. For perspective, £1 billion (approximately Rs 13,000 crore) provides a useful conversion benchmark. The UK is eliminating tariffs on about 99 per cent of tariff lines, covering nearly the entire value of India's exports. India has opened 89.5 per cent of its tariff lines, covering 91 per cent of UK exports, while only 24.5 per cent of UK export value receives immediate duty-free access; many concessions are phased over five, seven or ten years.

For India, the immediate opportunity is concentrated in employment-intensive sectors such as textiles, apparel, leather and footwear, marine products, gems and jewellery, toys and food processing, alongside engineering goods, chemicals and auto components. Growth in these sectors can generate broad-based employment. India's commitments also reflect calibrated openness. Duties on Scotch whisky and gin fall from 150 per cent to 75 per cent immediately and to 40 per cent after ten years. Tariffs on British cars can fall from as much as 110 per cent to 10 per cent, but only within a quota and through phased access. Meanwhile, sensitive sectors-including dairy, cereals and millets, pulses and specified vegetables-remain protected. Competition is introduced while domestic producers in strategic sectors receive time to build scale and technology. The transition should ultimately be assessed by whether it raises productivity.

Official modelling estimates that the agreement could increase annual bilateral trade by £25.5 billion in the long run and raise India's GDP by about £5.1 billion annually. These are estimates relative to a no-agreement baseline, not guaranteed outcomes; the official assessment itself acknowledges significant uncertainty. Realisation depends on firms claiming preferences, satisfying rules of origin, meeting product standards and responding to new price signals. That makes preference utilisation the central metric. A tariff preference has value only when an exporter can claim it and deliver competitively. International evidence shows that rules of origin and certification costs weigh disproportionately on smaller firms. An MSME may find that paperwork and testing absorb much of the apparent tariff advantage.

The government has successfully completed the demanding work of negotiation. The next phase requires an implementation partnership among the Union government, states, export promotion councils, financial institutions and industry. India should consider a CETA Utilisation Mission built on its existing digital trade infrastructure. It should provide sector-specific rules-of-origin guidance, standard documentation, tariff calculators, certification support and rapid grievance resolution through a single interface. The mission should publish a quarterly utilisation scorecard. Aggregate trade values alone can mislead, as exchange rates, commodity prices, and the business cycle also affect them. A more useful dashboard would track preference utilisation rates, the number and size of participating firms, rejected origin claims, first-time exporters, and product diversification. The agreement asks customs authorities to endeavour to release compliant goods within 48 hours when no physical examination is required; actual clearance times should therefore also be reported.

The second priority is standards. The UK market places a premium on quality, traceability, safety and credible certification. Tariffs may fall to zero, but regulatory requirements remain. Testing laboratories in major export clusters should be aligned with UK accreditation requirements, while negotiations on mutual recognition should continue where regulatory objectives permit. Export credit, logistics support and design assistance should help firms move from low-value supply to branded and higher-value products.

The third priority is carbon competitiveness. The UK's Carbon Border Adjustment Mechanism is scheduled to begin on January 1, 2027, covering specified goods in aluminium, cement, fertiliser, hydrogen, iron and steel. This is not an argument against CETA; it is the next frontier of competitiveness. A zero tariff cannot indefinitely compensate for high embedded carbon. Although the legal liability rests with UK importers, Indian suppliers will increasingly need verified product-level emissions data, cleaner energy and access to green finance. CETA implementation should therefore connect with India's wider decarbonisation and manufacturing strategy.

Services and professional mobility offer another strategic gain. The companion Double Contributions Convention prevents double social-security contributions for eligible detached workers sent temporarily between the two countries for up to 60 months. It does not change immigration or settlement rules. CETA also broadens access for contractual service suppliers, intra-corporate transferees and independent professionals, and provides a collective annual quota of 1,800 places for Indian chefs, yoga teachers and classical musicians. The number is modest, but the precedent is valuable: professional mobility is being treated as part of economic integration rather than as a peripheral issue.

Execution will finally be local. The agreement is national, but its gains will be realised in manufacturing and services clusters, district export hubs, ports, testing centres and bank branches. State governments should identify products with immediate UK potential and establish cluster-level facilitation teams. This would align trade policy with employment policy because many beneficiary sectors are both MSME-intensive and labour-intensive.

CETA also signals a broader evolution in India's trade strategy under Prime Minister Narendra Modi: from generalised defensiveness towards selective integration, backed by safeguards for sensitive sectors. This is a confident approach to globalisation-using external market access to strengthen domestic capability, not to substitute for it. As India advances towards Viksit Bharat 2047, trade agreements must become instruments for productivity, technology, formalisation and better jobs.

The text has opened the door; institutions and enterprises must now walk through it. The most meaningful measure of success will not be the number of tariff lines liberalised, but the number of Indian firms that export for the first time, move up the value chain and create durable employment. If implementation receives the same policy attention as negotiation, the India-UK CETA can become a model of how India converts diplomatic access into broad-based economic capability.

Gourav Vallabh, Member, Economic Advisory Council to the Prime Minister, & Prof. of Finance, XLRI; Views presented are personal.