(UNI SPECIAL)
Dr Rupa Dutta & Utsav Nayak
New Delhi, Jul 15 (UNI) India is in the midst of a consequential trade recalibration. With trade agreements concluded with Mauritius, the UAE, Australia, the EFTA bloc, EU, and the United Kingdom - New Delhi is, for the first time in a generation, using trade policy as an active instrument of economic strategy.
The India–UK Comprehensive Economic and Trade Agreement (CETA), signed in July 2025, is one of the most structurally significant of these agreements. It is also one of the most revealing: its sectoral architecture exposes the fundamental asymmetries that attend any FTA between a high-income economy and a large developing one. Understanding those asymmetries and building a domestic strategy to overcome them is the central policy challenge of India's current trade moment.
India's most durable comparative advantage in trade lies in services, IT-BPM, digital engineering, professional consulting, financial services, and healthcare. The CETA's services chapter acknowledges this: the UK has made commitments across all 12 major service sectors and 137 sub-sectors, covering over 99 per cent of India's service export interests. The accompanying Double Contribution Convention (DCC), signed in February 2026 and entering into force alongside CETA, exempts Indian workers temporarily in the UK from dual social security contributions - and the final exemption period was extended to five years, up from the three years originally discussed at signing, directly reducing the cost of deploying Indian talent in British markets.
Mode 4 remains this agreement's most significant unresolved issue, notwithstanding that improvement. India's ability to fully leverage its human capital advantage depends not merely on FTA text but on the practical operationalisation of visa and work-permit frameworks. The UK's politically constrained immigration environment means that even contracted mobility provisions face administrative friction in practice. For India, this is not an academic concern: the gap between FTA-level commitments and ground-level labour mobility is where the largest portion of India's service export potential is liable to leak away.
Looking ahead, India needs to institutionalise a bilateral monitoring mechanism to track utilisation rates of mobility commitments, identify bottlenecks, and engage the UK in periodic reviews. Domestically, aligning professional certification standards with UK requirements in architecture, engineering, accountancy, and legal services will be equally critical. The FTA opens the door, and the DCC has made walking through it easier; Indian institutions must now ensure professionals are actually positioned to do so.
The automotive provisions of the CETA illustrate both the tactical sophistication of India's negotiating position and the inherent limits of that approach. India has agreed to reduce import duties on UK-manufactured vehicles from over 110 per cent to 10 per cent under a tariff-rate quota (TRQ) that opens gradually over 15 years, per DGFT's July 9, 2026 notification implementing CETA - starting at a combined 20,000 units annually across engine categories and expanding to 37,000 by year five.
Electric, hybrid, and hydrogen vehicles are notably excluded from this early liberalisation rather than being its focus: they receive no duty concessions whatsoever for the first five years, and even thereafter only premium EVs above £40,000 CIF qualify, on quotas thin enough to be largely symbolic, while anything priced below that threshold stays permanently outside the concession regime to protect India's mass-market EV makers. This structure effectively concedes the luxury segment - Jaguar, Land Rover, MINI, Bentley - where domestic manufacturers do not compete, insulating the mass-market and mid-range tiers and shielding the domestic EV industry specifically for at least the first five years of the agreement.
The commercial value of an FTA is only as large as the export community's capacity to use it. Preferential tariff access under the CETA is conditional on meeting Rules of Origin (RoO) requirements, typically a minimum Regional Value Content of 40–45 per cent and a change in tariff subheading. For Indian exporters, particularly MSMEs in textiles, leather, engineering goods, and processed foods, this compliance architecture represents a significant operational challenge. Outreach, handholding, and certification support for exporters navigating RoO requirements is not a peripheral concern; it is the mechanism through which FTA commitments translate into actual export revenue.
Beyond the bilateral agreement, India can pursue multilateral and regional cumulation arrangements that will allow inputs sourced from partner economies to count toward origin requirements. This is especially important for complex value chains - EV components, electronics, and medical devices where competitive sourcing of intermediates is essential.
Market access is necessary but not sufficient. India's export ambition, including the target of USD 1 trillion in merchandise exports by 2030, requires a domestic trade infrastructure that is fast, transparent, and cost-competitive. The digitisation of trade documents, integration of GST platforms with port operations and DGFT systems, and investment under the Trade Infrastructure for Export Scheme (TIES) are not administrative niceties: they are competitive necessities. Slow customs clearance, port congestion, and high logistics costs erode tariff advantages before they reach the exporter.
For MSMEs, the challenge is compounded by rising compliance requirements embedded in modern FTAs - RoO certificates, sustainability disclosures, carbon-footprint reporting, and product traceability standards. The Export Promotion Mission, including the revival of the Interest Equalisation Scheme for MSMEs and international factoring support, is being implemented with urgency. District-level export hubs, where local industries can specialise, access shared infrastructure, and connect to global supply chains, represent one of the most promising instruments for translating FTA access into distributed, employment-generating export growth.
The India–UK CETA is neither a remedy nor a liability. It is a framework, a starting point whose economic value will be determined entirely by what India does with it. The structural asymmetries in its sectoral balance are real: the UK extracts immediate, tangible gains in automobiles and beverages, while India's largest gains, in services and goods exports, are conditional on implementation quality, mobility operationalisation, and domestic competitiveness. The Mode 4 constraint on labour mobility is the single most consequential gap between the FTA's text and its potential; closing that gap through bilateral review mechanisms, certification alignment, and persistent diplomatic engagement should be India's primary near-term priority in managing this relationship.
The broader lesson of India's current FTA moment is that trade agreements are facilitators and multipliers, not engines. They amplify the competitiveness of what a country already produces; they do not substitute for the investments, reforms, and institutional capacity that underpin that competitiveness. For India to convert preferential access into durable export advantage across the UK, the EU, the US, and the Gulf it must build the backend with the same strategic attention it has brought to the negotiating table.
(Rupa Dutta, is former Principal Economic Advisor to the Indian government and is currently distinguished fellow at a leading think tank. Utsav Nayak is a research analyst at a leading think tank. Views are personal.)
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