India-UK Trade Agreement Takes Effect, Boosting Export Opportunities
New Trade Framework Established
The Comprehensive Economic and Trade Agreement (CETA) between India and the UK, along with the Social Security Agreement, has officially commenced, creating a fresh framework for trade relations. Piyush Goyal, the Commerce Minister, shared this significant update on X, stating, "Today signifies a pivotal moment in the relationship between India and the UK."
Mitali Nikore, a Senior Economist and Founder of Nikore Associates, highlighted that India accounts for approximately 3% of the UK's pharmaceutical imports and 5% of engineering goods. The introduction of duty-free access is expected to eliminate price barriers. However, challenges remain regarding market access and non-tariff barriers related to knowledge. Indian MSMEs require support at the cluster level to meet UK standards, certification, and rules of origin, along with funding to manage compliance costs. Without this assistance, the benefits may be limited to firms already exporting to the UK.
Labour-intensive industries such as garments, textiles, footwear, carpets, processed foods, cereals, vegetables, fruits, spices, fish, meat, and processed products will now have zero-duty access to the UK market. Sanchita Mukherji, a Senior Business Economist and Managing Partner at Talk The Walk LLP, remarked that the CETA's implementation represents a significant shift for Indian exports, providing immediate duty-free access to nearly 99% of India's export value. This change removes tariffs ranging from 4% to 16% on high-volume, labour-intensive sectors, enhancing India's competitive position in the UK market.
The recent depreciation of the rupee further compounds this advantage, making Indian goods more affordable in foreign currency terms without affecting domestic profit margins. This currency shift, combined with tariff reductions, creates a robust environment for Indian exporters to capture a larger share of the UK market and boost trade growth. For example, in the steel sector, where India has successfully navigated major UK safeguard restrictions, exports are expected to rise from $900 million to $1 billion by FY27. Additionally, the elimination of a 10% tariff on Indian garment exports is projected to significantly increase India's current $1.3 billion share of the UK's $21.3 billion apparel market.
In the jewellery sector, the removal of a 4% customs duty grants Indian jewellers unrestricted access to a $3 billion annual UK jewellery market, with expectations for outbound shipments to double within the next 2 to 3 years from a baseline of $941 million. Furthermore, Indian industrial chemicals and petrochemicals will gain duty-free access to a substantial $28.35 billion UK chemicals market, covering 1,206 specific tariff lines (approximately 12.4% of the trade agreement's focus). With tariffs between 4% and 16% eliminated on agricultural products like spices, marine goods, fruits, and processed foods, overall Indian agricultural exports to the UK are anticipated to surge by over 50% within three years.
Nasser Salim, Managing Director of Flexi Capital, stated that the India-UK FTA is a landmark achievement for Indian exporters, offering preferential access on nearly 99% of tariff lines in the UK market. This significantly boosts the competitiveness of key sectors such as textiles, engineering goods, gems and jewellery, leather, and food products, while laying a strong foundation for export-led growth and deeper economic collaboration between the two nations.