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The Diplomat
10 hours ago
- Business
- The Diplomat
India Closes Landmark Trade Pact With UK
Indian Prime Minister Narendra Modi with his U.K. counterpart Keir Starmer during Modi's two-day visit to the U.K. on July 23-24, 2025, when the two sides signed a key trade pact. India and the United Kingdom signed a landmark trade pact, the Comprehensive Economic and Trade Agreement (CETA), during Prime Minister Narendra Modi's visit on July 23-24. The pact opens a new chapter in bilateral economic relations against the backdrop of rising geopolitical uncertainty and economic flux stemming from the U.S. announcement of unilateral tariffs. The agreement, which contains almost 30 chapters, has been described as 'forward-looking' and the 'largest' India has negotiated in terms of complexity and depth. It covers trade in goods and services, telecommunications, digital trade, financial and professional services, labor mobility, environment, and social issues like labor rights and development cooperation, as well as support for small and medium enterprises. Hailing the agreement as a 'blueprint for shared prosperity,' Modi said that it would reduce the 'cost of doing business' and enhance 'confidence of doing business' between the two economies, even as it strengthens the global economy. U.K. Prime Minister Keir Starmer described the CETA as 'historic' and pointed out that it would 'boost wages and living standards' in the two countries. 'It will bring down the prices of Indian clothes, shoes, foods for British citizens,' he said. The agreement with the U.K., the world's sixth-largest economy, is particularly significant for India as its pacts with two other major developed economies, the U.S. and the European Union (EU), are still under negotiation. The CETA could therefore serve as the template in these negotiations. In addition, India's deal with the U.K. would help undercut arguments that paint India — the world's fourth largest economy — as isolationist or obstructive when it comes to trade matters. U.S. President Donald Trump has frequently called India a 'tariff king' – a scathing commentary on what he views as India's high tariffs protecting its domestic markets and industries. Days after the CETA was signed, Indian Commerce Secretary Sunil Barthwal pointedly said that India was capable of facing competition and was not a 'tariff king,' with average tariffs for the U.K. set to drop to 3 percent from the current 15 percent. With India's economic profile rising, the Indian government would like to be seen as trade-friendly, welcoming of investors, and an easier place to do business. India's budget 2025-26 contained a slew of measures, including the setting up of a new committee to review regulatory reforms in the non-financial sector with the aim of strengthening trust-based economic governance to improve ease of doing business. Discussions for a pact between India and the EU began in 2007. But they floundered in 2013, and it was only in 2022 that negotiations were resumed. Meanwhile, India began trade discussions with the U.S. during Trump's first term in office (2017-2021). Talks resumed after Trump returned to the White House in January 2025. India's trade with the U.S. in 2024 totaled almost $130 billion; trade with the EU was $155 billion (132 billion euros) during the same period. With the U.K., India's bilateral trade is about $56 billion, with both countries pledging to double this number by 2030. With the deal with the U.K. in the bag, India now has 16 trade agreements in place, including those with Australia and the United Arab Emirates. A closer look at the CETA reveals that India has managed to protect its interests while exhibiting flexibility to accommodate demands from the U.K. An Indian government statement said that the CETA provides for the elimination of almost 99 percent of tariff lines, accounting for almost the entire value of Indian exports to the U.K. It will significantly enhance market access and boost the competitiveness of Indian textiles, marine products, leather, footwear, sports goods, toys, gems and jewelry, besides fast-growing sectors like engineering goods, auto components, and organic chemicals. Most of these sectors are labor-intensive, employing millions of workers. By securing zero duties in these areas, India has ensured its exports remain competitive. For instance, in the case of textiles, the CETA guarantees that Indian exports retain their advantage vis-à-vis those from other textile-exporting nations like Bangladesh or Vietnam. Analysts have pointed out that finding an alternative market for Indian marine products, including shrimps, in the U.K. through the CETA means that India is ringfencing this sector from future economic and political shocks that could come its way from markets like China. Given India's mostly tense ties with Beijing, finding alternative markets is an imperative that the CETA addresses. Dairy products and edible oils have been kept out of the ambit of the pact, while almost all of Indian agricultural products and processed food items will now have zero import duties when entering the U.K. market. This protects India's sensitive farm sector — agriculture and allied activities that contribute to 16 percent of India's GDP and support 46 percent of the population, according to Indian Finance Ministry data. A second key feature of the CETA is that India has agreed to loosen controls that will allow U.K. firms into its previously closely guarded government procurement market. British companies will be free to bid for 40,000 Indian government contracts worth about $40 billion, provided the firms fulfil a 20 percent local content sourcing criterion. This move aligns India with global norms on public procurement. However, certain sectors like defense and agriculture remain outside the ambit of the CETA. India has also committed to greater transparency by agreeing to publish information related to procurement on government portals. Some strategic sectors, like defense, are out of the purview of this, but still, the move is seen as a significant gesture toward the United Kingdom. The CETA does not exempt India from the U.K.'s Carbon Border Adjustment Mechanism (CBAM), which aims to tax carbon-intensive products. This could affect India's exports of iron, steel and fertilizers. India has said it would retaliate should the U.K. impose this measure from early 2027. The pact also provides for increased mobility of Indian professionals by simplifying access requirements and allowing easier movement of contractual service providers, business visitors and independent professionals. A separate Double Contributions Convention that was signed alongside the CETA will eliminate the need for Indians in the U.K. to pay social security contributions in both countries, simultaneously, for a period of three years. This is expected to benefit some 75,000 Indians working in the U.K. Analysts Nisha Taneja and Nirlipta Rath of the New Delhi-based Indian Council for Research on International Economic Research have said that CETA sets 'a progressive benchmark for the country's future trade negotiations.' According to Bidisha Bhattacharya, a senior research consultant at the Chintan Research Foundation, the signing of the CETA is 'not a retreat from protectionism but a recalibration of India's trade strategy.' It involved using strategies like phased liberalization, minimum pricing thresholds, and value addition rules. By doing so, 'India is carefully walking the line between global integration and domestic resilience,' Bhattacharya wrote in a recent article. This was not India embracing multilateralism offered on unfavorable terms but India seeking bilateral agreements with high-income economies that offered reciprocal access, she pointed out. With the World Trade Organization looking increasingly irrelevant and dysfunctional, it's natural for countries to look for bilateral or regional arrangements that secure their access to key global markets. Though it is a late entrant, India seems to be learning to play the game, albeit slowly.
Fibre2Fashion
a day ago
- Business
- Fibre2Fashion
Indian industry leaders weigh in on CETA with UK
During the recent London visit of Prime Minister Narendra Modi, India and the United Kingdom officially signed a Comprehensive Economic and Trade Agreement (CETA), marking a significant advancement in strengthening bilateral economic relations. The deal signed by Commerce Minister Piyush Goyal and his British counterpart Jonathan Reynold in the presence of Prime Minister Modi and UK Prime Minister Keir Starmer is designed to reduce tariffs on a wide range of goods—including textiles, whisky, and automobiles—while also enhancing market opportunities for businesses in both countries. According to the agreement, 99 per cent of Indian exports to the UKâ€' encompassing over 1,143 crucial textile and clothing itemsâ€'will now enjoy zero-duty access. Stakeholders confident the deal between the world's sixth- and fifth-largest economies will significantly benefit the Indian textile and apparel sector. The zero-duty regime is expected to take at least a year to come into effect. The trade talks, which spanned over three years with intermittent progress, reached a conclusion in May. Negotiators on both sides accelerated efforts to finalise the deal against the backdrop of global tariff disruptions set in motion by the Trump administration. Bringing together two of the world's top economies —ranked sixth and fifth globally—the deal sets an ambitious goal of increasing bilateral trade by $34 billion by 2040. For the United Kingdom, this is its most substantial trade pact since its departure from the European Union in 2020. For India, it marks a major strategic breakthrough, establishing a comprehensive economic partnership with an advanced economy and potentially laying the groundwork for similar agreements with the European Union and other global partners. According to the agreement, 99 per cent of Indian exports to the UK— encompassing over 1,143 crucial textile and clothing items, as per reports—will now enjoy zero-duty access, providing Indian exporters with a stronger foothold in the British market. Reacting on the development. Sudhir Sekhri, Chairman AEPC , said, 'The signing of the landmark India-UK bilateral trade agreement, marks a significant milestone in strengthening the strategic and economic ties between the two nations. This deal will usher a new era of garment trade with the UK. This agreement will enhance market access, spur investment and job creation in the garment sector, besides creating new opportunities for businesses and consumers on both sides.' He further added: 'The India-UK CETA will not only give competitive market access to the Indian apparel products in the UK market but also increase the trust and reliability factor by streamlining customs procedures and mutual recognition of standards, thereby, reducing the compliance burdens for the Indian apparel exporters. With duty-free access, the apparel exports to the UK will witness a renewed thrust and moment in the coming years.' Dr. A. Sakthivel, Honorary Chairman of Tiruppur Exporters' Association (TEA) and Vice Chairman of AEPC , hailed the signing of the agreement and commended both the Prime Minister and the Ministry of Commerce & Industry for what he called a transformative deal for India's textile and apparel industry. He maintained: 'This agreement paves the way for a historic leap forward for our industry,' adding, 'It resonates strongly with our national vision to place India among the top three global economies.' Dr. Sakthivel further shared with Fibre2Fashion the deal's benefits for regional textile hubs, citing improved access for key manufacturing centres including Tiruppur, Surat, Ludhiana, Pune, Chennai, West Bengal, and Assam. He also pointed out that Indian exporters are now in a much stronger position to compete with counterparts from Bangladesh, Vietnam, and China in the UK's textile and apparel market. Reflecting on the potential boost to India's readymade garment (RMG) sector, Dr. Sakthivel said: 'We anticipate that exports of RMG to the UK will more than double—from $1.45 billion to approximately $3.25 billion. Within this, knitwear alone is expected to grow from $0.8 billion to around $2 billion, accounting for nearly 70 per cent of total RMG exports to the UK.' Speaking to Fibre2Fashion, N Thirukkumaran, chairman of Esstee Exports and General Secretary of TEA said India's apparel exports is expected to double in the next 2-3 years, thanks to the India-UK CETA. He also noted that this agreement could serve as a model for future successful FTAs, including with the European Union. Thirukkumaran further emphasised the positive impact of the India-UK CETA on job creation in the textile sector, which remains the second-largest source of employment in India after agriculture. Meanwhile, interacting with Fibre2Fashion, Rahul Mehta, the chief mentor of the Clothing Manufacturers Association of India (CMAI) underlined that 'the India-UK CETA is obviously going to have huge impact on textiles and apparel exports from India, with prices being reduced by close to 10 per cent.' 'While I may not share the euphoria of some of my peers, I do see our apparel exports rising from the current $1.3 billion to probably around $2.0 to $2.2 billion over the next few years,' said Mehta. 'That said, we must remember the zero-duty regime will likely take at least a year, if not longer, to come into effect. Plus, UK buyers have stringent compliance and sustainability requirements. Indian exporters will need to significantly upgrade their operations to meet these growing expectations—particularly around sustainability,' he added. Though not overly concerned about the potential impact of the FTA on India's domestic market, the CMAI chief mentor nevertheless expressed surprise that this issue has largely gone unnoticed in media discussions. 'It is zero per cent on both sides, remember!' Mehta concluded with a note of caution. Fibre2Fashion News Desk (DR)
Time of India
a day ago
- Business
- Time of India
UK firms can offer telecom, construction services in India without local office under CETA
New Delhi: Companies from the UK will be able to offer services in sectors such as telecom, and construction in India without setting up a local presence, under the free trade agreement signed between the two countries. The British firms will be treated on par with Indian firms. The Comprehensive Economic and Trade Agreement (CETA) was signed on July 24 in London. It may take about a year for items implementation as the free trade pact needs approval from the British Parliament. "UK companies can now provide telecom, construction, and related services in India without establishing a local presence, enjoying full national treatment, meaning they will be treated on par with Indian firms," the commerce ministry said. Services is a key chapter in the agreement as both countries are strong in different kinds of services. India enjoys a trade surplus of around USD 6.6 billion with the UK. The country's services exports stood at USD 19.8 billion and imports at USD 13.2 billion. In the agreement, the UK has provided a comprehensive and deep market access in 137 sub-sectors to Indian firms. On the Indian side, commitments have been extended in 108 sub-sectors, granting UK firms access to domains like accounting, auditing, financial services (with FDI capped at 74%), telecom (100% FDI allowed), environmental services, and auxiliary air transport services, it said.>
Time of India
a day ago
- Business
- Time of India
Industry welcomes India-UK trade pact
Ludhiana: The recently signed India-UK FTA, officially known as the Comprehensive Economic and Trade Agreement (CETA), has been welcomed as a transformative development for Punjab's industrial landscape by key industry leaders in the region. Upkar Singh Ahuja, president of the Chamber of Industrial and Commercial Undertakings, said, "This agreement is a transformative opportunity for Punjab's industrial and economic landscape." He emphasised that it will allow Punjab-based exporters to gain a competitive edge through reduced tariffs and improved market access, leading to a significant increase in exports. "It paves the way for technology exchange, skill development, and joint ventures, particularly MSMEs," he said. Echoing similar sentiments, Pankaj Sharma, president of the Association of Trade & Industrial Undertakings, hailed the pact as a "historic development" that will reshape India-UK trade relations over the next five years. "This landmark pact will double India-UK trade by eliminating tariffs on 99% of Indian exports," Sharma said, adding that labour-intensive sectors such as textiles, garments, footwear, and jewellery would gain the most. Pointing out the implications for Punjab specifically, Sharma said cities like Ludhiana, home to a vast network of textile and hosiery units, and Jalandhar renowned for its sports goods industry, stand to benefit directly. "Zero tariffs on textile exports will allow our manufacturers to compete on equal footing with countries like Pakistan, Bangladesh, and Cambodia," he added. The agreement also grants tariff exemptions on exports of basmati rice, fruits, and cotton, major agricultural commodities from Punjab, thus promising a boost for farmers and agro-industries. Sharma further added that the FTA would open up new horizons for young entrepreneurs, especially those working in emerging sectors and advanced manufacturing technologies. BOX BOOST TO BIZ TIES By providing duty-free access to the UK market for key products such as textiles, auto components, tractor parts, and sports goods, including soccer balls, cricket gear, and non-electronic toys, as well as packaged food and vegetables, the FTA will strengthen our manufacturing sectors, known globally for quality and innovation Upkar Singh Ahuja, president, Chamber of Industrial and Commercial Undertakings This landmark pact will double India-UK trade by eliminating tariffs on 99% of Indian exports. Labour-intensive sectors such as textiles, garments, footwear, and jewellery will gain the most Pankaj Sharma, president, Association of Trade & Industrial Undertakings
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Business Standard
2 days ago
- Business
- Business Standard
UK cos can offer telecom services in India without local office under CETA
Companies from the UK will be able to offer services in sectors such as telecom, and construction in India without setting up a local presence, under the free trade agreement signed between the two countries. The British firms will be treated on par with Indian firms. The Comprehensive Economic and Trade Agreement (CETA) was signed on July 24 in London. It may take about a year for items implementation as the free trade pact needs approval from the British Parliament. "UK companies can now provide telecom, construction, and related services in India without establishing a local presence, enjoying full national treatment, meaning they will be treated on par with Indian firms," the commerce ministry said. Services is a key chapter in the agreement as both countries are strong in different kinds of services. India enjoys a trade surplus of around $6.6 billion with the UK. The country's services exports stood at $19.8 billion and imports at $13.2 billion. In the agreement, the UK has provided a comprehensive and deep market access in 137 sub-sectors to Indian firms. On the Indian side, commitments have been extended in 108 sub-sectors, granting UK firms access to domains like accounting, auditing, financial services (with FDI capped at 74 per cent), telecom (100 per cent FDI allowed), environmental services, and auxiliary air transport services, it said.
