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India’s landmark free trade agreement with the United Kingdom came into effect from today, opening a new chapter in bilateral economic ties by giving nearly 99 per cent of Indian exports preferential access to the UK market.
The Comprehensive Economic and Trade Agreement (CETA) between India and the UK, along with the Double Contribution Convention (DCC) on social security, became operational from July 15.
The pact is expected to boost India’s labour-intensive sectors, including textiles, leather, footwear, gems and jewellery, processed food, marine products, engineering goods and auto components, by eliminating tariffs and improving their competitiveness in one of the world’s largest consumer markets.
Commerce Secretary Rajesh Agrawal described the agreement as a “defining milestone” in India’s trade journey, saying it establishes a future-oriented economic partnership between two major economies.
He said the agreement would mark the beginning of a new phase in India-UK trade and investment relations by reducing tariff and non-tariff barriers while expanding cooperation in areas such as digital trade, government procurement, small and medium enterprises, innovation, labour, environment and gender.
The agreement aims to increase bilateral trade between India and the UK to $100 billion by 2030. Currently, trade between the two countries stands at around $55-60 billion.
Exporters gain from tariff cuts
Under the agreement, Indian exporters will benefit from the elimination of UK tariffs across a wide range of products.
Tariffs of up to 70 per cent on processed food products, over 21 per cent on marine products, around 18 per cent on engineering goods and auto components, up to 16 per cent on leather and footwear, and nearly 12 per cent on textiles and clothing will be reduced to zero.
The move is expected to strengthen India’s position in the UK market, where exporters have faced tariff disadvantages compared with competitors such as Bangladesh, Vietnam and Cambodia in sectors like garments.
Textile and apparel exporters are expected to be among the immediate beneficiaries as the removal of duties could improve price competitiveness for Indian manufacturers.
The gems and jewellery sector is also looking to expand its presence in the UK market following duty elimination, while processed food exporters are expected to gain opportunities in categories such as ready-to-eat products, seafood and ethnic foods.
However, experts have cautioned that tariff benefits alone will not guarantee export growth. Indian companies, particularly MSMEs, will need to improve quality standards, supply-chain efficiency and compliance with UK regulations to fully utilise the agreement.
India keeps sensitive sectors protected
While the pact provides wide market access, India has protected several sensitive sectors from immediate competition.
Dairy products, cereals, millets, edible oils, oilseeds, apples and several vegetable products remain outside tariff concessions.
The government has also protected small and mid-segment internal combustion engine (ICE) vehicles and affordable electric vehicles under the agreement.
Premium vehicles from the UK will receive phased tariff concessions. Customs duties on large ICE vehicles will gradually fall under tariff-rate quotas, reaching 10 per cent by the fifth year.
Concessions for premium electric vehicles, hybrid cars and hydrogen-powered vehicles will begin from the sixth year, allowing India’s domestic automobile industry additional time to strengthen its capabilities.
Social security relief for Indian professionals
Alongside the trade agreement, the Double Contribution Convention came into force, providing relief to Indian professionals and companies operating in the UK.
Under the arrangement, eligible Indian workers sent to the UK on temporary assignments will not have to pay social security contributions in Britain for the specified period.
At present, Indian employees and employers contribute to the UK’s National Insurance system, which can add up to around 23 per cent of salary costs.
Industry estimates suggest the arrangement could lead to savings of nearly $600 million for Indian companies and professionals.
The move is expected to benefit Indian IT companies, service providers and other businesses that regularly deploy employees to the UK.
Silver, premium spirits among UK beneficiaries
The agreement also provides benefits to British exporters.
Silver is expected to emerge as
one of the biggest beneficiaries, with India having imported silver bars worth around $5 billion from the UK in FY2025-26.
Britain accounted for a significant share of India’s refined silver imports, and duties on silver bars will be phased out over a 10-year period under CETA.
However, gold bars have not received tariff concessions.
Premium alcoholic beverages, including Scotch whisky, have also received tariff relief. Import duties on Scotch whisky will be reduced from 150 per cent to 75 per cent initially and gradually lowered further over 10 years, subject to conditions such as minimum import prices.
A new phase in India-UK economic ties
Signed on July 24, 2025, in London in the presence of Prime Minister Narendra Modi and UK Prime Minister Keir Starmer, the India-UK CETA is among New Delhi’s most comprehensive trade agreements.
The pact covers 30 chapters, including goods and services trade, digital commerce, investment, innovation and sustainable development.
The implementation of the agreement marks a significant step in India’s push to expand its global trade footprint and integrate more deeply with developed economies.
The real test now will be how effectively Indian businesses, especially smaller exporters, leverage the duty-free access and overcome challenges related to logistics, technology, quality standards and global competition.
