What Does the New India-UK Trade Agreement Mean for Businesses and Consumers?
India-UK Trade Agreement Set to Launch
New Delhi: The Comprehensive Economic and Trade Agreement (CETA) between India and the UK, finalized on July 25, 2025, is set to take effect on July 15, 2026.
This marks the sixth free trade agreement initiated by the Narendra Modi administration, following similar agreements with countries such as Mauritius, the UAE, Australia, the European Free Trade Association, and Oman.
This significant agreement is expected to provide duty-free access for nearly 99% of Indian exports to the UK.
Here are some crucial aspects of CETA that highlight its importance for Indian businesses and consumers:
Key Benefits for India
Advantage India:
Sectors that rely heavily on labor, including garments, textiles, footwear, carpets, processed foods, cereals, vegetables, fruits, spices, fish, meat, and processed products, will now enter the UK market without any duties. Currently, duties on these items range from 4% to 16%.
Additionally, there will be duty reductions on British goods such as salmon, lamb, machinery, electronics, chocolates, soft drinks, cosmetics, soaps, perfumes, shaving creams, and nail polish, potentially lowering prices in the Indian market.
India plans to eliminate tariffs on silver, which is the largest import from the UK, over a period of ten years.
Impact on the Auto Industry
Auto Sector:
For the first time in a free trade agreement, India has committed to significantly reducing import duties on fully-built cars and trucks manufactured in the UK. Tariffs will decrease from 110% to 10% gradually.
Concessions will apply to petrol and diesel vehicles from the outset, while electric, hybrid, and hydrogen vehicles will receive preferential access starting in the sixth year, allowing Indian EV manufacturers five years of protection.
India will permit the import of 378,000 conventional-engine passenger cars from the UK at reduced customs duties during the first 15 years of the agreement.
Furthermore, tariffs on UK-made trucks imported as fully-built units will drop from 44% to 8.8% within the quota by Year 5, with the quota increasing from 2,500 trucks in Year 1 to 3,500 by Year 5.
Alcohol and Other Goods
Alcohol:
The agreement reduces tariffs on a variety of premium alcoholic beverages, including cider, mead, sake, brandy, bourbon, rum, gin, vodka, liqueurs, and tequila.
For qualifying products, the standard 150% duty will decrease to 110% in Year 1 and further to 75% by Year 10, applicable only above a minimum import price.
For Scotch whisky, India's tariff will drop from 150% to 75% initially and then to 40% by Year 10.
Exclusions and Government Procurement
No Concessions:
India will not offer duty concessions on certain products, including fresh apples, walnuts, whey, blue-veined cheese, gold bars, and smartphones. The UK has also excluded various meat products and specific types of sugar.
Government Procurement:
India has opened up its government procurement market to UK suppliers, allowing access to approximately 40,000 high-value contracts in sectors like transport, green energy, and infrastructure.
Intellectual Property and Other Provisions
Intellectual Property Rights:
India has agreed to stronger intellectual property enforcement obligations while maintaining its right to use compulsory licensing for essential technologies during emergencies.
Double Contribution Convention:
Indian firms operating in the UK will not need to make social security contributions for up to five years for employees transferred from India, benefiting major IT companies like Tata Consultancy Services and Infosys.
Trade Statistics
Bilateral Trade and Investment:
Trade between India and the UK increased by 8.62% to USD 25.12 billion in 2025-26, up from USD 23.13 billion in the previous fiscal year. India's exports fell by 7.6% to USD 13.44 billion, while imports surged by 36.11% to USD 11.68 billion.
In 2025-26, India attracted USD 1 billion in foreign direct investment, compared to USD 795 million in 2024-25.