The India-UK Comprehensive Economic and Trade Agreement (CETA), signed on July 24, 2025, has been described as a bold effort by both governments to open their economies and deepen strategic alignment. But look more closely, and what emerges is a more complex picture—one that reveals as much about domestic political constraints as it does about economic vision.
Critics have long accused both governments of caving to powerful domestic lobbies—in both countries, farmers and the automotive sector are important lobbyists. India's withdrawal from the Regional Comprehensive Economic Partnership in 2019 still looms large in assessments of its trade posture. Yet CETA suggests both countries are willing to push forward, though carefully.
For the United Kingdom, the trade concessions are symbolically generous but economically modest. Nearly all Indian goods—around 99 percent of tariff lines and the vast majority of trade value—will enter duty free. But the actual fiscal cost is limited, given the United Kingdom's already low trade-weighted average tariff of just 1 percent. The UK government estimates an annual tariff revenue loss of about USD 296 million and politically sensitive sectors like sugar remain protected.
CETA suggests that India and the United Kingdom are willing to push forward, though carefully.
India, with higher average tariffs of 4.5 percent, is cutting or eliminating duties on 90 percent of tariff lines. Yet even here, the financial sacrifice is manageable at about USD 538 million in annual revenue lost. Like the United Kingdom, politically sensitive agricultural goods, including rice and dairy, are either excluded or the reductions are phased in over a 10-year period.
The United Kingdom expects a major boost to bilateral trade from CETA, reaching a long-run annual increase of approximately USD 34.3 billion by 2040. As of August 2025, India enjoys a trade surplus, but CETA is likely to reverse that by 2040.
But the picture changes somewhat when we look at sector-specific impacts.
The automotive sector reveals how skewed the benefits can be. India's automotive market is large, with nearly 5 million vehicles sold annually, yet UK manufacturers may see limited gain. Quotas are tight for UK-made compact and subcompact cars at just 10,000 units per year. A separate quota for luxury vehicles—another 10,000 units—caters to a far narrower slice of the market.
Brands like Jaguar, Land Rover, Rolls-Royce, and Aston Martin may benefit. But they are competing in a niche dominated by German automakers which already assemble almost all their vehicles in India to take advantage of lower tariffs on components. Designing trade policy to benefit a few thousand high-end car buyers does little to advance inclusive growth. It also risks reinforcing the perception that trade deals serve elites over the average citizen.
CETA is a win for Scotch whisky, for which India is already the second-largest market. India will slash tariffs on whisky and gin from 150 per cent to 75 percent immediately, and eventually to 40 percent over a decade. With Indian consumption of Scotch whisky growing in double digits, the Scotch Whisky Association expects its market share in India to double to six percent by 2040, a major success for British exporters—albeit again for the benefit of the Indian elite.
The exclusion of legal services from the Indian list of permitted provisions represents a major setback for the United Kingdom's legal sector. Legal services are an acknowledged area of UK expertise and the sector lobbied strongly for market access under CETA. This effort was resisted by the Indian legal community. Notably, Indian legal service providers are allowed to establish a commercial presence in the United Kingdom.
Under CETA, India also agreed to recognize voluntary licensing—allowing patent holders to grant licenses in exchange for royalties—as the preferred mechanism for ensuring access to medicines, strengthening protections for the intellectual property rights of British pharmaceutical firms. But because compulsory licensing is rarely invoked, shifting to voluntary licensing is unlikely to have a major impact on India's generic drug industry while shoring up the United Kingdom's intellectual property regime.
CETA is designed to maximize opportunities in areas where each country already holds a competitive advantage, while steering clear of sectors that may ignite domestic backlash.
CETA is about more than market access. It includes provisions to streamline customs, align standards, and ensure transparency. For the first time in a trade pact, India has agreed to include language on labor standards, gender equality, state-owned enterprises, and environmental cooperation. The deal also supports UK investments in future areas of growth such as clean energy, recycling, and the circular economy.
Overall, CETA is designed to maximize opportunities in areas where each country already holds a competitive advantage, while steering clear of sectors that may ignite domestic backlash—though with some losses for the middle classes.
It is not perfect, but it would be a mistake to dismiss CETA as window dressing. It reflects a broader shift from trade liberalization for its own sake to trade as a tool for strategic, sustainable development.
In that sense, CETA may be less about tearing down barriers and more about building modern, rules-based economic cooperation. And that, too, is progress.
