New Delhi | The UK-India free trade agreement that took effect on Wednesday sets a "new gold standard" for global trade deals as it delivers sweeping sectoral benefits and sends a powerful message in support of a rules-based order, British High Commissioner Lindy Cameron said.
The mega trade pact, officially known as the Comprehensive Economic and Trade Agreement (CETA), is being billed as one of the biggest trade deals of modern times and secures zero-duty market access for nearly 99 per cent of India's exports to the UK.
The coming into force of the CETA assumed greater significance as it came amid a fractured global trade environment largely triggered by US President Donald Trump's policies on trade and the lingering conflict in West Asia.
The trade deal, firmed up in July last year after three years of negotiations, will provide for comprehensive market access for Indian goods across all sectors, and India will gain from tariff elimination on about 99 per cent of tariff lines (product categories) covering almost 100 per cent of the trade values, according to officials.
It will facilitate slashing tariffs on British whisky and cars among other items and is set to double bilateral trade by 2030.
The trade deal is expected to help the Indian economy in sectors like textiles, leather, gems and jewellery, engineering goods, marine products, chemicals and processed foods.
A bilateral social security agreement too has been operationalised along with the trade deal.
Cameron, interacting with a group of journalists, said India and the UK have "unlocked the combined economic might of two global economic powerhouses".
The high commissioner said that the UK-India trade is set for an immediate boost as consumers will now be able to enjoy cheaper, quicker and easier access to the best of British and Indian products and services across both countries.
To celebrate the coming into force of the trade pact, a special package of select British goods arrived at the British mission in Mumbai this morning aboard a British Airways flight.
The package contained goods from the UK benefiting from reduced tariffs, including cosmetics, food products and alcoholic beverages.
"The UK-India FTA is the new gold standard of trade deals as it is pro-worker, pro-innovation, and pro-growth. It's a force multiplier and a template for future trade agreements," the British high commissioner said.
The pact sends a message to the rest of the world that the rules-based order works, she stressed.
"The UK-India trade deal brings sweeping benefits for a wide range of sectors. From today, import duty on Scotch whisky has been cut from 150 per cent to 75 per cent which should make a really significant difference to the price the consumer pays," she said.
"The FTA is also the biggest and the most ambitious modern free trade agreement to enter into force to date for both of our countries. It's the quickest turnaround for the UK bringing a new deal into force," she noted.
Cameron also said that the import duties on premium UK-built cars will also begin to fall from over 110 per cent to 10 per cent, making iconic British cars cheaper for Indian consumers.
"From today, our economies, our businesses, and most importantly, our people are going to start seeing the benefits of this trade deal. 99 per cent of Indian goods and 90 per cent of UK products entering India will be duty-free or (will have) reduced tariffs," she said.
The India-UK bilateral trade crossed USD 55 billion in 2023-24. The UK is the sixth largest investor in India, with a cumulative investment of USD 36 billion.
India's investments in the UK are close to USD 20 billion, and some 1,000 Indian companies operating in Britain provide employment to almost 100,000 people.
"This is a watershed moment for the UK-India partnership. As the landmark trade deal comes into force, what better than having select British products arriving in one of the very first UK flights into India this morning - with thanks to support from British Airways," the UK's Trade Commissioner for South Asia Harjinder Kang said in Mumbai.
"Our landmark trade deal is designed to benefit businesses and consumers from day one with cheaper, quicker and easier trade. We are all excited to take full advantage of it."
David Wright, British Airways' General Manager in India, said: "India is one of British Airways' most important markets and we have a long history of connecting people, businesses, and cultures across the UK and India."
"With 63 flights each week going up to 70 by the end of summer, we play an important role in strengthening economic and cultural ties between our two countries."
Wright said the UK-India free trade agreement marks a significant milestone in the bilateral relationship and reinforces the long-term potential of one of the world's most dynamic international corridors.
"We are proud to support this landmark agreement and the opportunities it will create for trade, investment and tourism.
New Delhi | India exported goods worth USD 140 million to the UK at zero duty on day one under the comprehensive economic and trade agreement (CETA), which became operational on Wednesday, Commerce Secretary Rajesh Agrawal said.
He said that the agreement is a pact between two major and complementary economies.
Terming the CETA as one of the most aspirational trade agreements by India to date, Agarwal said that over 800 technical sessions were held over 14 formal rounds of negotiations to conclude the pact.
It is a win-win agreement between the two countries, which will have a shadow across economic relations, Agrawal said while addressing industry and exporters on the day of operationalisation of the pact.
The Department of Commerce, he said, will work with export promotion councils to help industrial clusters understand the benefits of the agreement. The agreement grants duty-free access to nearly 99 per cent of Indian exports from sectors such as leather, footwear, textiles, mechanical and electrical machinery, plastic, base metals, marine products and gems and jewellery.
These sectors were earlier facing import duty in the UK market in the range of 2-16 per cent.
During the day, over 50 export consignments valued at more than USD 140 million were flagged off from more than 20 ports, airports, Inland Container Depots (ICDs), Special Economic Zones (SEZs) and factories across India.
The consignments covered a wide range of products, including electronics, pharmaceuticals, and gems and jewellery, and were dispatched from locations, including the seaports of Mundra, Nhava Sheva and Chennai, as well as air cargo complexes at Mumbai (Sahar), Kolkata and Hyderabad.
Speaking on the occasion, Lindy Cameron, British High Commissioner to India, said the agreement is expected to increase bilateral trade by over 25 billion pounds annually over the long term and contribute nearly 5 billion pounds annually to the GDP of both the UK and India.
GOVERNMENT PROCUREMENT (GP)
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The pact includes a chapter on government procurement, which provides Indian suppliers legal access to the UK government procurement market worth around GBP 90 billion (USD 122 billion).
India offers reciprocal opportunities of around USD 114 billion to the British market.
UK suppliers receive treaty-backed access to covered central government procurement in India, and firms meeting a 20 pc UK-content threshold may qualify as Class 2 Local Suppliers.
Explaining the issue, Additional Secretary in the Department of Commerce Darpan Jain said that a number of safeguards are in the pact to protect the interests of domestic MSMEs.
"India reserves the right to grant preferential treatment to its MSMEs as per its policy. So that is not affected," he said, adding that the GP commitments are not applicable at the state level.
Even at the central government level, he said, it is not applicable across all departments, PSUs and entities.
"There are selected entities to which it is applicable," Jain said, adding that in strategic sectors, the UK firms will not be allowed.
The fourth safeguard is that there is a minimum threshold under which UK firms can participate in government procurement contracts valued at more than Rs 5.5 crore.
For activities like construction contracts, the threshold is over Rs 60 crore.
INTELLECTUAL PROPERTY RIGHTS (IPRs)
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On concerns with regard to IPRs by certain quarters, Jain said there is nothing in the agreement which says the Indian government cannot use compulsory licensing (CL).
As per the WTO (World Trade Organization) agreement, a CL can be invoked by a national government, allowing someone else to produce a patented product or process without the consent of the patent owner in the public interest.
Only one CL has been issued by India so far for the cancer drug Nexavar (2012), and that too under exceptional public health circumstances.
CARBON BORDER ADJUSTMENT MECHANISM (CBAM)
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India and the UK are engaged in discussions on this issue.
In December 2023, the UK government announced that it would implement its Carbon Border Adjustment Mechanism (CBAM) starting in 2027.
According to economic think tank GTRI, India's exports worth USD 775 million to the UK may be impacted due to Britain's decision to introduce a carbon tax on products, like iron and steel, aluminium, fertiliser and cement, from 2027.
An official said that this regulation is contested by some people in the UK also.
"They also have people who are saying it is required, some people saying it is not required. So, they are still deliberating upon this. They have not yet taken a final view on it," the official said.
"But we have made it very clear. Whenever you (UK) take a final view, if it affects our exports, then we would definitely seek an adjustment. And we are engaged with them on the issue," the official added.
The pact provides that if the UK imposes a carbon tax in the future and it adversely affects India's exports, New Delhi may withdraw certain concessions.
CHAPTERS ON GENDER, SME, ENVIRONMENT, LABOUR
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When asked if the inclusion of these chapters in the pact affects the policy space of India, Jain said there is no dispute settlement in these chapters.
"So, the UK cannot take us to dispute that you are not doing this, you are in violation of this," he said, adding "all our laws, whether in gender or labour or in environment, all our laws are actually aligned to whatever international treaties we are agreeing to".
The official said there is nothing to worry about as India is doing much more than other countries on these matters.
"Our policies are more progressive," the official added.