India–U.K. Comprehensive Economic and Trade Agreement (CETA): From Market Access to Market Share

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20 Jul India–U.K. Comprehensive Economic and Trade Agreement (CETA): From Market Access to Market Share

Posted at 20 Jul 2026 in Current Affairs, Daily Current Affairs for UPSC by
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Why in the News?

The India–U.K. Comprehensive Economic and Trade Agreement (CETA) marks a significant shift in India’s free trade strategy, aiming to balance market liberalisation with protection of sensitive domestic sectors. While the agreement offers zero-duty access to 99% of India’s exports to the U.K., its success will depend on India’s ability to convert improved market access into higher market share through enhanced competitiveness, regulatory reforms, and export readiness.

What is the India–U.K. CETA?

The Comprehensive Economic and Trade Agreement (CETA) is a Free Trade Agreement (FTA) between India and the United Kingdom designed to:

  • Eliminate or reduce tariffs on goods and services.
  • Improve market access for businesses.
  • Promote investment and technology transfer.
  • Strengthen integration into global value chains (GVCs).
  • Enhance bilateral trade and economic cooperation.

Key Features of the Agreement

1. Zero-Duty Market Access

  • The U.K. will provide zero-duty access to 99% of India’s exports.
  • The agreement covers almost the entire value of bilateral merchandise trade.
  • It is expected to improve the competitiveness of Indian exports in the U.K. market.

2. Balanced Trade Liberalisation

Unlike some earlier FTAs, India has adopted a cautious approach by protecting sensitive sectors while expanding export opportunities.

For example:

  • Sensitive agricultural and dairy sectors received protection.
  • Liberalisation has been calibrated rather than unconditional.

This reflects India’s evolving FTA strategy.

3. Promotion of Services Trade

The agreement provides benefits for India’s services sector through:

  • Easier mobility for professionals.
  • Improved business opportunities.
  • Reduction in double taxation through the Double Contribution Convention, benefiting Indian professionals working in the U.K.

4. Integration into Global Value Chains

The agreement seeks to:

  • Increase participation in international production networks.
  • Attract foreign investment.
  • Facilitate technology transfer.
  • Improve export diversification.

Opportunities for India

Expansion into a High-Income Market

Although the U.K. accounts for only around:

  • 3% of India’s merchandise exports
  • 1% of India’s merchandise imports

it remains a high-income consumer market with significant demand for Indian goods and services.

Boost to Labour-Intensive Exports

Potential beneficiary sectors include:

  • Textiles and garments
  • Leather products
  • Gems and jewellery
  • Engineering goods
  • Pharmaceuticals
  • IT services

Increased Foreign Investment

Trade agreements often improve investor confidence by:

  • Providing policy certainty.
  • Reducing trade barriers.
  • Expanding production networks.

Technology Transfer

Closer economic cooperation may facilitate:

  • Advanced manufacturing technologies.
  • Innovation partnerships.
  • Skill development.
  • Supply chain integration.

Challenges

Limited MSME Preparedness

Many Micro, Small and Medium Enterprises (MSMEs) face challenges such as:

  • Poor documentation.
  • Limited export compliance capacity.
  • Lack of awareness regarding FTA provisions.
  • High certification costs.

As a result, they may be unable to fully utilise preferential market access.

Non-Tariff Barriers (NTBs)

Even after tariff reductions, exporters must comply with stringent U.K. standards relating to:

  • Sanitary and Phytosanitary (SPS) measures.
  • Technical regulations.
  • Sustainability standards.
  • Quality certification.

These often pose greater challenges than tariffs.

Regulatory Bottlenecks

India continues to face:

  • Complex administrative procedures.
  • Slow dispute resolution.
  • Weak intellectual property enforcement.
  • High compliance costs.

These reduce the effectiveness of trade agreements.

Carbon-Related Trade Measures

Future climate-related regulations, including carbon border measures, could adversely affect India’s carbon-intensive exports unless production becomes greener.

Lessons from Earlier FTAs

The article highlights India’s experience with previous FTAs, particularly the India–ASEAN FTA.

Key Lesson

Despite tariff reductions:

  • India’s trade deficit with ASEAN increased from approximately US$10 billion (2017) to nearly US$44 billion (2023).

This demonstrates that market access alone does not guarantee export growth unless domestic industries remain globally competitive.

Market Access vs Market Share

Market Access

Refers to the removal or reduction of trade barriers that allow exporters to enter foreign markets.

Examples include:

  • Tariff reduction.
  • Quota removal.
  • Easier customs procedures.

Market Share

Refers to the proportion of total imports in a foreign market supplied by a particular country.

Achieving higher market share requires:

  • Competitive pricing.
  • High product quality.
  • Innovation.
  • Reliable supply chains.
  • Compliance with international standards.

Thus, market access creates opportunities, while market share depends on competitiveness.

Way Forward

Strengthen MSME Export Capacity

  • Improve awareness of FTA provisions.
  • Simplify export documentation.
  • Expand export facilitation centres.

Improve Regulatory Efficiency

  • Reduce compliance costs.
  • Strengthen dispute settlement.
  • Enhance intellectual property protection.

Enhance Product Competitiveness

Focus on:

  • Innovation.
  • Quality certification.
  • Branding.
  • Productivity improvements.

Support Green Manufacturing

Promote:

  • Low-carbon production.
  • Renewable energy adoption.
  • Sustainable supply chains.

Expand Trade Facilitation

  • Improve logistics.
  • Modernise ports.
  • Digitise customs procedures.
  • Reduce transaction costs.

UPSC Prelims Practice Question

Q. With reference to the India–U.K. Comprehensive Economic and Trade Agreement (CETA), consider the following statements:

  1. The agreement provides zero-duty access to about 99% of India’s exports to the United Kingdom.
  2. Non-tariff barriers such as sanitary and phytosanitary standards may continue to affect Indian exports even after tariff reductions.
  3. Market access obtained through a Free Trade Agreement automatically ensures a higher market share for exports.

Which of the statements given above is/are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2 and 3

Answer: (a)

Explanation

  • Statement 1 is Correct: The India–U.K. CETA is expected to provide zero-duty market access to about 99% of India’s exports, covering nearly the entire value of bilateral merchandise trade.
  • Statement 2 is Correct: Even with reduced tariffs, exporters must comply with non-tariff barriers such as SPS measures, technical regulations, quality standards, and sustainability requirements, which can significantly affect trade.
  • Statement 3 is Incorrect: Market access only creates an opportunity to export. Achieving a higher market share depends on factors such as product quality, competitiveness, pricing, regulatory compliance, and efficient supply chains.

 

 

Ayush Ranjan
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