India-UK CETA (Comprehensive Economic and Trade Agreement)- (UPSC/RAS) Current Affairs {Economy}

The Strategic Shift- It marks a major milestone in deepening bilateral economic integration by offering zero-duty access on nearly 99% of India's exports (covering almost 100% of the trade value), greatly strengthening India's export competitiveness.
India's GDP was $3.96 trillion in 2025, UK's was $3.84 trillion roughly similar size. Merchandise trade between them was $25.12 billion in 2025-26, and India actually runs a trade surplus here (~$1.76 billion). Services trade is even bigger for India $35.44 billion total, with India enjoying a services surplus of $7.88 billion, since India exports far more IT/services to the UK than it imports.
Bilateral Investments- The UK is India's 6th largest inward investor, with USD 35 billion in cumulative equity investments. India's outward FDI in the UK stood at USD 19 billion. Currently, 971 Indian firms operate in the UK (employing over 1 lakh people), while 667 British firms operate in India (employing over 5 lakh people).

Safeguarding National Interests & Calibrated Market Access

To protect sectors aligned with the Make in India and Production Linked Incentive (PLI) schemes, India implemented highly structured exclusions and phased tariff reductions over 5, 7, or 10 years-

1. Absolute Exclusions (No Tariff Concessions)

Agriculture & Dairy- Cereal and millets, milk and dairy products, pulses, apples, edible oils, oats, and fresh vegetables.
High-Value/Sensitive Commodities- Gold, silver jewelry, lab-grown diamonds, essential oils, critical energy fuels, marine vessels, worn clothing, critical polymers/monofilaments, smartphones, and optical fibers.

2. Calibrated Automotive Quotas & EV Safeguards

CBU Quotas- Established a phased, quota-based strategy allowing up to 37,000 passenger vehicle Completely Built Units (CBUs) per year to enter at preferential tariffs.
Affordable EVs Protected- Concessions for electric vehicles (EVs) are restricted, commencing only from Year 6 to give domestic manufacturers time to scale technology and competitiveness.
Large-Engine ICEs- Large internal combustion engine (ICE) vehicles (above 3000 cc petrol / 2500 cc diesel) see in-quota tariffs drop to 10% over 5 years, and out-of-quota tariffs fall to 50% over 10 years.

3. Alcoholic Beverages

India has gradually and selectively opened its market to alcoholic beverage imports.

A. Textiles and Ready-Made Garments (RMG)

The Advantage- Zero-duty market access across 1,143 tariff lines.
Strategic Impact- Eliminates the historical tariff disadvantage India faced in the UK market vis-à-vis competitors like Bangladesh, Pakistan, and Cambodia.
Key Beneficiaries- RMG, home textiles, carpets, and handicrafts.

B. Agriculture and Allied Products

The Advantage- Zero-duty market access across 1,437 tariff lines.
WTO Waiver- The UK has agreed to forego its right to apply WTO agricultural safeguards against Indian imports.
Projections- Agricultural exports are projected to rise by over 50% within 3 years, putting Indian grapes, spices, and fresh vegetables on par with tariff-free EU exporters like Germany and the Netherlands.

C. Leather, Footwear & Plastics

Leather & Footwear- Zero-duty access to the UK's USD 8.9 billion market, raising India's projected exports to over USD 900 million and strengthening competitiveness against Vietnam and Indonesia.
Plastics- Duty-free access across 1,206 tariff lines (fertilizers, packaging, tableware, petrochemicals).

D. Marine Products

The Advantage- Complete elimination of previous UK tariffs (which ranged from 4.2% to 8.5% on Indian shrimp).
Impact- Expected to boost processing capacity and wages for women workers, who constitute the vast majority of processing plant workforces in coastal states (Kerala, Tamil Nadu, Andhra Pradesh, Gujarat, Odisha, West Bengal).

E. Engineering, Electronics & Pharmaceuticals

Engineering- Zero-duty market access across 1,659 tariff lines (17% of total), aiming to double engineering exports to USD 7.5 billion by 2029-30.
Pharmaceuticals- Zero-duty access on 56 key tariff lines. It eliminates duties on medical devices (ECG machines, surgical tools, X-ray systems), positioning India to replace Chinese medical supply chains post-Brexit.

F. Steel Sector Alignment

To counter the UK's July 2026 steel safeguard measures, India negotiated expanded tariff-free quotas across 3 product categories-

Hot-Rolled Sheets (Cat 1)- Quota increased 3x from 12,405 to 33,456 tonnes, with 40% reserved exclusively for India under the Authorised Use Scheme (AUS) (translating to 9.45 lakh tonnes of dedicated trade volume).
Non-Alloy Wire (Cat 28)- Removed 9 commodity codes from restrictions, leaving 95% of Indian exports in this category tariff-free.

The services sector is India’s primary offensive interest, represented by a USD 7.9 billion trade surplus. Under CETA, India secured commitments in all 12 major services sectors and 137 sub-sectors (covering 99% of India's interests)-

A. Double Contribution Convention (DCC)

The Change- Previously, Indian professionals on short-term UK assignments paid ~23% of their salaries into the UK’s National Insurance system without getting any benefits.
The Reform- The DCC eliminates these dual social security contributions for assignments up to 60 months.
Impact- Benefits over 75,000 Indian professionals and 900 companies, yielding an estimated annual saving of USD 600 million.

B. Mutual Recognition & Visa Quotas

MRA Roadmap- Both countries committed to establishing Mutual Recognition Agreements (MRAs) for professional qualifications in nursing, accountancy, and architecture within 12 months.
No Numerical Barriers- The UK has agreed not to apply an Economic Needs Test (ENT) or arbitrary numerical caps on Indian professionals. A dedicated annual quota of 1,800 positions is reserved for Indian Contractual Service Suppliers.

C. Temporary Entry Stay Framework

Service Category	Stay Duration under CETA
1. Business Visitors (BV)	90 days in any 6-month period across all sectors.
2. Intra-Corporate Transferees (ICT)	3 years (including partners/dependents and Graduate Trainees).
3. Investors	1 year.
4. Contractual Service Suppliers (CSS)	12 months in a 24-month period across 33 sub-sectors (IT, finance, hospitality).
5. Independent Professionals (IP)	12 months in a 24-month period across 16 sub-sectors (IT, telecom, consultancy).

7. Shared Government Procurement Market

Access Thresholds- Indian suppliers gain access to the UK's government procurement market worth GBP 90 billion (USD 122 billion).
Reciprocity- The UK receives reciprocal access to India's USD 114 billion procurement market, opening fair bidding opportunities in IT, construction, financial services, and select educational institutions.

Source : PIB

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