NEW DELHI — A landmark trade agreement between India and the United Kingdom officially takes effect tomorrow, eliminating tariffs on billions of dollars’ worth of Indian exports to the UK market, including textiles, leather, footwear, gems, jewellery, and plastics. The deal, finalized after nearly two years of negotiations, represents one of the most significant post-Brexit trade pacts for the UK and a strategic economic opening for India as it seeks to diversify its export markets beyond traditional partners like the United States and the European Union.
Under the agreement, Indian exporters in the specified sectors will gain duty-free access to the UK for the first time, a move both governments have framed as a catalyst for job creation, investment, and deeper bilateral ties. The UK government has positioned the pact as a cornerstone of its “Global Britain” strategy, while Indian officials have emphasized its potential to revitalize labor-intensive industries that have struggled with rising production costs and global competition.
However, the deal’s long-term impact remains uncertain, with analysts warning that its success will depend on implementation, regulatory alignment, and broader economic conditions in both countries. While the agreement covers a wide range of goods, key sectors such as agriculture, automobiles, and certain industrial products remain subject to tariffs or quotas, reflecting lingering sensitivities on both sides. The pact also includes provisions on digital trade, intellectual property, and sustainable development, though details on enforcement and dispute resolution mechanisms remain sparse.
What Happened
The India-UK Comprehensive Trade Agreement (CETA), signed in May 2026 after 22 rounds of negotiations, will enter into force on July 15, 2026. The deal eliminates tariffs on approximately 90% of Indian exports to the UK by value, with immediate duty-free access granted to four major sectors:
– Textiles and apparel: India’s textile exports to the UK, valued at $1.2 billion in 2025, will no longer face the previous 12% average tariff. The sector employs over 45 million people in India, many in small and medium-sized enterprises (SMEs), and is seen as a critical source of rural employment.
– Leather and footwear: UK tariffs of up to 16% on Indian leather goods and footwear will be removed, potentially boosting exports that totaled $500 million in 2025.
– Gems and jewellery: India, the world’s largest diamond cutting and polishing hub, will see tariffs of up to 4% on gold jewellery and 2% on polished diamonds eliminated. The sector, which exported $1.8 billion worth of goods to the UK in 2025, is expected to benefit from reduced costs for Indian manufacturers.
– Plastics: Tariffs of up to 6.5% on Indian plastic products, including packaging and consumer goods, will be scrapped. The UK imported $400 million worth of Indian plastics in 2025.
In return, India has agreed to reduce tariffs on certain UK exports, including Scotch whisky, automobiles, and select machinery, though these concessions are phased in over several years. The UK has also secured commitments on intellectual property protections and digital trade, including provisions to facilitate cross-border data flows and e-commerce.
Why It Matters
For India, the deal represents a strategic opportunity to reduce its reliance on traditional export markets, particularly the EU and the US, which together accounted for nearly 30% of India’s merchandise exports in 2025. The UK, now outside the EU’s single market, has been actively seeking new trade partners, and India—with its fast-growing economy and young workforce—has emerged as a priority.
The tariff eliminations could provide a near-term boost to Indian exporters, particularly in sectors like textiles and gems, which have faced stiff competition from Bangladesh, Vietnam, and China. The Indian government estimates that the deal could add $10 billion to bilateral trade over the next five years, though independent analysts caution that this projection assumes robust demand in the UK and smooth implementation.
For the UK, the agreement aligns with its post-Brexit strategy to diversify trade relationships. The UK government has touted the deal as evidence of its ability to strike “high-standard” trade agreements outside the EU, though critics argue that the economic gains may be modest compared to its pre-Brexit trade volumes with the bloc. The UK’s trade with the EU was worth £668 billion ($850 billion) in 2025, while its trade with India totaled £36 billion ($46 billion) in the same period.
The deal also reflects broader geopolitical shifts. Both India and the UK have sought to strengthen ties amid rising global trade tensions, particularly between the US and China. The agreement includes a commitment to “uphold international trade rules” and avoid “unfair trade practices,” a nod to concerns about China’s state-subsidized industries. However, the pact stops short of including explicit anti-China provisions, reflecting India’s cautious approach to aligning too closely with Western trade blocs.
Background and Context
Negotiations for the India-UK trade deal began in January 2022 but faced repeated delays over disagreements on market access, intellectual property, and labor standards. The UK initially pushed for deeper concessions on agriculture and services, including financial services and legal services, while India sought greater access for its skilled professionals under the UK’s visa regime. These issues were largely set aside in the final agreement, with both sides agreeing to address them in future negotiations.
The deal builds on the 2021 Enhanced Trade Partnership (ETP) between the two countries, which set a target of doubling bilateral trade by 2030. While trade between India and the UK has grown steadily in recent years, it remains a fraction of India’s trade with China ($118 billion in 2025) or the US ($191 billion in 2025). The UK is currently India’s 15th-largest trading partner, accounting for just 2.3% of India’s total merchandise trade.
The agreement also reflects India’s broader trade strategy under Prime Minister Narendra Modi, which has focused on securing bilateral deals with key partners while remaining cautious about joining large multilateral blocs like the Regional Comprehensive Economic Partnership (RCEP). India has signed trade agreements with Australia and the United Arab Emirates in recent years and is in negotiations with the EU, Canada, and the Gulf Cooperation Council (GCC).
For the UK, the deal is part of a wider push to establish itself as a global trade hub post-Brexit. The UK has signed trade agreements with Australia, New Zealand, and Japan, and is in negotiations with the US and India’s regional rival, Pakistan. However, none of these deals have matched the scale of the UK’s pre-Brexit trade with the EU, leading some economists to question whether the government’s “Global Britain” strategy can deliver meaningful economic benefits.
Competing Claims and Uncertainty
While both governments have hailed the deal as a “win-win,” independent analysts and industry groups have raised several concerns about its implementation and long-term impact.
1. Sectoral Impact: The immediate benefits are expected to flow to India’s labor-intensive sectors, particularly textiles and gems. However, some industry groups warn that Indian exporters may struggle to compete with lower-cost producers in Bangladesh and Vietnam, which already enjoy duty-free access to the UK under the Everything But Arms (EBA) initiative for least-developed countries. “The tariff elimination is a positive step, but Indian manufacturers will need to invest in automation and quality control to stay competitive,” said Sakthivel Palaniswami, president of the Tirupur Exporters’ Association, a major textile hub in southern India.
2. UK Market Access: The UK has framed the deal as an opportunity to reduce its reliance on Chinese imports, particularly in sectors like textiles and plastics. However, the UK’s Office for Budget Responsibility (OBR) has cautioned that the economic benefits of post-Brexit trade deals are likely to be “small and gradual.” A 2025 report by the OBR estimated that the UK’s trade deals with non-EU countries, including India, could boost UK GDP by just 0.1% over 15 years.
3. Regulatory and Logistical Challenges: Indian exporters have raised concerns about non-tariff barriers in the UK, including stringent product standards, labeling requirements, and customs procedures. The deal includes provisions for regulatory cooperation, but industry groups say implementation will be key. “The devil is in the details,” said Anil Bhardwaj, secretary-general of the Federation of Indian Micro and Small & Medium Enterprises (FISME). “If UK customs continue to delay shipments or impose arbitrary inspections, the benefits of tariff elimination could be eroded.”
4. Digital Trade and Intellectual Property: The agreement includes chapters on digital trade and intellectual property, with commitments to facilitate cross-border data flows and protect patents and trademarks. However, details on enforcement are limited, and some legal experts warn that disputes could arise over data localization requirements and pharmaceutical patents. “The digital trade provisions are forward-looking, but they lack the teeth to address issues like data sovereignty or forced technology transfers,” said Arun Sukumar, head of the Technology and Society Initiative at the Observer Research Foundation.
5. Labor and Environmental Standards: The deal includes commitments to uphold labor and environmental standards, but critics argue that these provisions are weak and lack binding enforcement mechanisms. UK labor unions have expressed concern that the deal could lead to “race to the bottom” competition, with Indian manufacturers undercutting UK producers on wages and environmental regulations. “This deal risks undermining UK jobs and standards without delivering meaningful protections for workers in India,” said Frances O’Grady, general secretary of the Trades Union Congress (TUC).
6. Geopolitical Considerations: While the deal does not explicitly target China, it reflects broader efforts by both India and the UK to reduce economic dependence on Beijing. India has been wary of joining Western-led trade blocs that could antagonize China, its largest trading partner. The UK, meanwhile, has sought to position itself as a counterweight to China in the Indo-Pacific, though its economic leverage remains limited compared to the US or EU.
What to Watch Next
1. Early Trade Data: The first quarterly trade data after the deal’s implementation will be closely watched to assess its initial impact. Analysts will look for signs of increased Indian exports to the UK, particularly in the four zero-duty sectors. Any surge in shipments could provide early evidence of the deal’s effectiveness, while stagnant or declining exports could signal logistical or regulatory hurdles.
2. Implementation Challenges: Both governments have established a joint committee to monitor the deal’s implementation, but industry groups will be watching for signs of bureaucratic delays or disputes over non-tariff barriers. Any high-profile cases of shipments being held up at UK customs could undermine confidence in the agreement.
3. Future Negotiations: The deal leaves several contentious issues unresolved, including market access for UK financial services, legal services, and agricultural products, as well as India’s demand for easier visa rules for its skilled professionals. Both sides have agreed to continue negotiations on these issues, with a second phase of talks expected to begin in early 2027.
4. Competitive Responses: The deal could prompt other countries to accelerate their own trade negotiations with India. The EU, which has been in talks with India since 2022, may seek to conclude its own trade agreement to avoid losing market share in key sectors like automobiles and machinery. Similarly, the US, which has been pushing for a limited trade deal with India, could renew its efforts to secure concessions on agricultural and digital trade.
5. Domestic Political Reactions: In the UK, the deal could face scrutiny from opposition parties and labor unions, particularly if it leads to job losses in sectors like textiles or footwear. In India, the deal’s impact on small businesses and rural employment will be a key test of its political viability, particularly as the Modi government prepares for general elections in 2029.
6. Broader Economic Conditions: The deal’s
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Story synopsis gathered from: NDTV – India News — source.
