India-UK CETA And Its Strategic Implications For Investors

1. Introduction

Signed on July 24, 2025, the Comprehensive Economic and Trade Agreement ("CETA") between India and the United Kingdom ("UK") is a historic and determined deal to boost jobs, exports, and national growth. This agreement is UK's largest negotiated deal since it's exit from the European Union ("EU") and India's biggest agreement with a G7 economy in over a decade.¹ UK and India both have complementary economic structures and strategic imperatives. This agreement reflects the growing complexity in international trade law and underscores importance of economic diplomacy in the current global order. The agreement aims to increase bilateral trade between India and UK by 38.6%.² UK exports to India are projected to increase by £15.7 billion and India's exports to UK are expected to increase by £9.8 billion.³ Macroeconomic effects caused by the CETA are equally significant, with the UK GDP is expected to grow by £4.8 billion (0.13%) and India's GDP is expected to rise by £5.1 billion (0.06%).⁴ The percentages while seemingly modest are accompanied by long-term structural enhancements to trade flows, supply chain resistance and firm competitiveness.

Even with historical and cultural ties between the two countries, the bilateral trade remained modest in volume through the late 20th century. Post-Brexit, the UK shifted its focus away from trading within the EU market, pursuing global engagement and prioritising Indo-pacific economies and other high growth markets. India was early on identified as a priority partner in this regard, and this agreement signals strategic openness towards regulated market access and global competitiveness.⁵

This article examines key chapters of the India–UK CETA, including trade in goods and services, rules of origin, professional mobility, government procurement, labour, and gender-related provisions. It explores the commitments, highlights challenges arising therefrom, and offers an overall assessment along with recommendations to address CETA's limitations.

2. Legal Framework

Aligning Existing Legal Framework: CETA affirms that it does not restrict UK from implementing or upholding measures pursuant to the Windsor Framework, the post-Brexit arrangement, governing trade between Great Britain, European Union and Northern Ireland.⁶ However, such measures must conform to fundamental trade law principles and not result in arbitrary or unjustified discrimination against India, nor serve as a disguised restriction on bilateral trade. This preserves the UK's regulatory autonomy in a sensitive constitutional context while safeguarding the integrity and non-discriminatory application of the trade agreement.

Joint Committee, Sub-Committees and Working Groups:

1. Joint Committee: CETA establishes a robust institutional architecture anchored by a joint committee, which is empowered to (a) oversee the implementation and functioning of CETA; (b) monitor compliance and consider proposals for amendments or modifications to CETA; and (c) restructure, reorganize, or dissolve any of the sub-committees and working groups under CETA.
2. Sub-Committees: Five sub-committees have been instituted including sub-committees on trade in goods and services, sustainability, sanitary and phytosanitary measures.
3. Working Groups: The joint committee and sub-committees overlook specialized working groups focusing on technical and cross-cutting policy areas, including rules of origin, movement of natural persons, anti-corruption, professional services etc.

Bilateral Safeguard: The CETA also includes a bilateral safeguard mechanism which allows either countries to temporarily suspend tariff concessions or increase tariffs on specific originating goods if their import, as a result of tariff reductions, surges to a level that causes or threatens to cause serious injury to domestic producers. While temporary in nature, this safeguard offers a stabilising tool to help industries adjust to new competitive conditions, thereby supporting the broader goal of liberalised and balanced trade.

Rules of Origin: The Rules of Origin ("RoO") of CETA serve as the foundation for ensuring that only goods genuinely produced or processed within either country benefit from preferential tariff.

Methodology for Verifying Origin: Under CETA, India and the UK have agreed to a dual-track origin system that balances trade facilitation with regulatory safeguards.

1. Products may qualify as originating if they are wholly obtained or if they undergo substantial transformation within either party's territory. This includes meeting Product Specific Rules ("PSRs") through a Change in Tariff Classification ("CTC") or by achieving a minimum Qualifying Value Content ("QVC").
2. Standard thresholds for originating goods ranges from 35% to 45%, depending on whether the ex-works or Free on Board("FOB") value is used.
3. A de minimis tolerance provision further enables products to retain origin status even if a small proportion of non-originating materials fail the CTC test.
4. For many product categories exporters can fulfil either the CTC or QVC requirement. This is advantageous for sectors like chemicals, electrical components, footwear, and aircraft parts, where value addition may fall short of conventional thresholds due to global supply chain integration. This approach also aligns with global Free Trade Agreement ("FTA") practices.

Certification: CETA allows for both self-certification by exporters for Certificate of Origin ("CoO"), and importer's knowledge in the UK, whereby the importer may claim origin status based on credible documentation from the exporter. UK has waived the requirement for any proof of origin for e-commerce consignments valued below £1000, further simplifying small-scale exports from India.⁷

3. Business and Investment Implications

Tariff Liberalization: An important element of the CETA is the inclusion of Tariff Rate Quota ("TRQ") which reduces tariffs on specified volumes of imports, managed by designated agencies. Designed to adjust over a period of up to 15 years before stabilising, these quotas are strategically aligned with India's broader policy priorities, particularly in the electric vehicle ("EV") sector.⁸

Set out below are some of the key opportunities and tariff benefits for Indian businesses, across various sectors, under the CETA:

1. Textiles and Apparel: For textiles and clothing, tariffs up to 12% are immediately eliminated. Leather products and footwear have tariffs up to 16% whose reduction will be phased out over 5 years.
2. Gems and Jewelry: Tariffs up to 4% on cut-and-polished diamonds, gold jewellery and gemstones are immediately eliminated.
3. Automobiles: EVs priced above £80,000 benefit from higher TRQs and lower duty structures. Tariff on internal combustion engine vehicles will be reduced from 110% to 10% under TRQ.
4. Pharmaceuticals: No tariff on generic medicines and medical devices such as diagnostic equipment, X-Ray machines, ECG machines etc. Mutual recognition by the countries will allow Indian certified products to access UK markets freely.

India has secured protections for a range of sensitive sectors, such as agricultural products, dairy, cereals and millets, pulses, and vegetables, high-value goods including gold, jewellery, critical polymers etc. This reflects a deliberate strategy to shield domestic farmers, Micro, Small, and Medium Enterprises ("MSMEs"), and broader national interests from potential vulnerabilities arising from trade liberalisation.

Services and Mobility: Under CETA, India has secured market access across all 12 major service sectors and 137 sub-sectors, which effectively cover over 99% of its export interests. These include areas such as information technology ("IT") and IT-enabled services ("IT-ES"), professional and business services, financial services, healthcare, education, telecommunications, and aviation support.⁹

CETA allows India and UK to provide services across the countries, and the recipient countries shall provide treatment no less favourable than what it accords in its own countries. Some of the key opportunities for services sector under CETA include:

1. IT / IT-ES: CETA offers reduced compliance burdens and enhanced mobility of skilled professionals which increase the competitiveness of Indian service providers in the UK. On the other hand, with UK entrants in this sector, Indian firms will benefit from improved access to high-value contracts and a supportive regulatory environment.
2. Healthcare and Education Services: Indian healthcare providers can partner with UK institutions to deliver high-quality care, participate in knowledge transfer, and leverage advanced medical technologies. Further, UK institutions are now permitted to establish campuses in India, while Indian universities and education technology platforms may expand their presence in the UK.
3. Financial and Professional Services: Indian financial firms can now access the UK market on non-discriminatory terms, while UK investment into India's financial sector can foster innovation and competition. Inclusion of digital financial services and fintech integration, aligns with broader goals of financial inclusion and digitalisation in both countries.

CETA presents a coherent, future-oriented legal framework by combining broad commitments with sector-specific opportunities. However, a key omission is the exclusion of UK legal services from the Indian market, highlighting long standing regulatory sensitivities in this area.

Professional Mobility and Mutual Recognition: CETA provides a framework for temporary movement of Indian professionals to the UK, covering categories such as business visitors, intra-corporate transferees, independent professionals, and contractual service suppliers. Some of the key takeaways include:

1. The duration of stays ranges from 90 days to three years, with no numerical quotas or economic needs tests¹⁰, removing key procedural barriers.
2. The UK has also reserved 1,800 annual openings for Indian chefs, yoga instructors, and classical musicians to temporarily move to the UK, highlighting cultural and economic exchange.
3. CETA includes a commitment to conclude Mutual Recognition Agreements ("MRAs") in fields like nursing, accountancy, and architecture within 1 year of entry into force. The MRAs will harmonise professional standards and simplify cross-border credential recognition.
4. The Double Contribution Convention ("DCC") eliminates mandatory UK social security payments for Indian professionals on short-term assignments (up to 36 months), saving over USD 500 million annually.¹¹ This significantly lowers costs and enhances UK's appeal as a service destination for professionals.

Public Procurement: The CETA provides both UK and India access to the government procurement market. UK suppliers can competitively bid for a wide range of goods, services, and construction contracts across most central government entities and select state-owned enterprises in India. Similarly, Indian suppliers will get access to the UK procurement markets on non-discriminatory terms and will be treated at par with UK suppliers.¹² UK firms producing at least 20% of a good or service in UK will receive "Class II local supplier" status under India's 'Make in India' policy, a preferential treatment previously reserved for domestic suppliers.¹³

4. Socio-Economic and Inclusion Implications

Labour: The provisions in the chapter on labour influence employment patterns and wages in impacted sectors in both countries due to increased trade and related requirements. CETA aims to have shared objectives to prevent worker exploitation and create rights and protection. Both parties in the CETA have reaffirmed their commitment to the core conventions of the International Labour Organization ("ILO")¹⁴. The two countries continue to regulate their labour markets independently as per national priorities. However, a non-regression clause obligation is imposed to prevent exploitation of workers' rights and protection in the interest of increasing trade or investments, essentially protecting against a 'race to the bottom'.

Environment: CETA aims to support sustainable and inclusive economic growth, by reaffirming the parties' commitments to multilateral environmental agreements such as the Paris Agreement, Convention on Biological Diversity ("Biodiversity Convention"), and Montreal Protocol.¹⁵ The CETA establishes a voluntary framework without compromising regulatory autonomy for 'cooperation of parties on environment-related trade issues' and 'support a transition to low-carbon and climate-resilient economies' which lays specific emphasis on cooperation in: (i) climate change and commitments under the United Nations Framework Convention on Climate Change and Paris Agreement, (ii) prevention of marine littering and ship pollution, (iii) supporting circular economy practices, (iv) implementation of Convention on International Trade in Endangered Species of Wild Fauna and Flora and Biodiversity Convention, (v) encouraging sustainable supply chains and production methods, and (vi) prevention of deforestation and associated trade, and preservation of air-quality and ozone layer.

Trade and Gender Equality: CETA promotes trade and opportunities for women entrepreneurs and other similarly underrepresented groups, aimed at facilitating their increased participation in trade through:

1. improving access to finance, networks, and trade-related information for women entrepreneurs, particularly those leading MSMEs;
2. encouraging the development of inclusive digital trade ecosystems;
3. recognizing the impact of unequal distribution of unpaid care and domestic work;
4. promoting workplace flexibility to support women's participation in business leadership and decision-making roles; and
5. eliminating discrimination faced by women in the workforce and in trade.

CETA also establishes a Trade and Gender Equality Working Group ("TGEWG"), defining system of monitoring and evaluation to measure progress. Through TGEWG, mandates will likely be created for future stakeholder engagements with women including those from marginalized socio-economic groups to ensure inclusivity.¹⁶ Generally, the socio-economic chapters adopt a tone of collaboration and suggestion, while steering carefully around language such as 'shall' and 'preferably' using terms like 'should' and 'promote'. They are excluded from the main dispute resolution mechanism of the CETA and suggest a consultative process to resolve any concerns.

5. Recommendations

Based on the information and analysis provided above, set out below are some recommendations with respect to the CETA:

Effective implementation: CETA offers multiple advantages to both India and the UK, including enhanced trade in services, access to public procurement markets, and the facilitation of mobility. While the agreement does detail how these benefits will be operationalized, their practical implementation will be important to monitor. For instance, enabling Indian and UK suppliers to participate in each other's public procurement processes could present significant opportunities, provided such access is granted on a non-discriminatory basis and aligns with domestic content requirements for goods production. Smooth digital implementation of government tenders in this regard will be significant.

Quantifying Socio-Economic Impact: Incorporating economic modelling to assess the CETA's impact on key socio-economic sectors and quantify the potential benefits of its adoption would enhance the ability to evaluate outcomes, support evidence-based policy decisions, and effectively track progress toward sustainability goals.

Binding Dispute Resolution: The inclusion of binding dispute resolution mechanisms for breaches of core labour rights, environmental obligations, and violations of CETA provisions, along with consequences for repeated non-compliance could strengthen the enforceability of CETA's commitments and promote more consistent adherence to its objectives.

Other Investment Opportunities: FTAs are often limited to broader trade negotiations and political compromises, whereas Bilateral Investment Treaties ("BIT") allow for precise drafting of investor protections, tailored dispute resolution mechanisms, and preservation of regulatory sovereignty. A dedicated BIT framework, on the lines of 2015 Model Bilateral Investment Treaty, would be more effective in securing investor interests and can be independently negotiated or revised without affecting trade commitments under CETA.

6. Conclusion

Overall, the CETA marks a landmark shift in bilateral economic engagement and provides deep market access in goods, services, mobility and procurement. It offers transformative potential for sectors like textiles, pharmaceuticals, IT and services, and for enhancing India's cultural and human capital partnership with the UK. As the global supply chains become more integrated, India's position in this interconnected network will be strengthened with wide market access to the UK. Going further, execution strategies will determine whether the pact translates into long-term structural gains. With vigilant implementation, capacity strengthening, and policy adjustments in place, CETA could serve not just as a diplomatic milestone, but as a platform for sustainable socio-economic transformation aligning with India's development priorities.

Footnotes

1. Please refer https://www.indiatoday.in/india-today-insight/story/india-uk-fta-big-trade-some-trade-offs-and-a-whole-new-order-2764891-2025-08-01

2. Please refer https://www.phdcci.in/2025/07/21/india-uk-fta-set-to-boost-bilateral-trade-by-25-5-billion-annually-says-ms-anna-shotbolt-deputy-trade-commissioner-for-south-asia-at-the-british-high-commission-at-phdcci-event/

3. Please refer https://assets.publishing.service.gov.uk/media/6881f91d6a7ea0e1ce1d35c8/RPC-DBT-25056-IA_2__-_UK-India_FTA.pdf

4. Ibid.

5. Please refer https://assets.publishing.service.gov.uk/media/61e1b75e8fa8f5058d5a76bf/uk-india-free-trade-agreement-the-uks-strategic-approach.pdf

6. Chapter 1, Article 1.2(4) of the CETA

7. Please refer https://www.pib.gov.in/PressNoteDetails.aspx?id=154945&NoteId=154945&ModuleId=3

8. Please refer India-United Kingdom (U.K.) bilateral trade

9. Please refer https://www.pib.gov.in/PressNoteDetails.aspx?id=154945&NoteId=154945&ModuleId=3

10. An economic needs test is a requirement used in visa applications that assesses whether a foreign worker's presence in a country is economically beneficial. It typically involves demonstrating that there is a genuine need for the foreign worker's skills.

11. Please refer https://www.pib.gov.in/PressNoteDetails.aspx?id=154945&NoteId=154945&ModuleId=3

12. Please refer https://www.fortuneindia.com/economy/india-uk-ceta-what-the-government-procurement-chapter-means-for-indian-businesses/125215

13. Chapter 15, Article 15.4(8) of the CETA

14. The International Labour Organization is a United Nations agency with a tripartite structure involving governments, employers, and workers from 187 member states, tasked with creation of labour standards, create policies, and advance decent work and promoting social justice and labour rights.

15. Paris Agreement is a legally binding international treaty on climate change which was adopted by 196 countries(parties) at the 2015 UN climate change conference, also known as the COP21.

16. Please refer https://odi.org/en/insights/how-the-uk-india-trade-deal-shapes-womens-economic-empowerment/

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