29 Jul India–UK CETA: Unlocking the Services Trade Potential
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GS-2- International Relations- India–UK CETA: Unlocking the Services Trade Potential
FOR PRELIMS
What are the key gains for India in the services sector under the India–UK Comprehensive Economic and Trade Agreement (CETA)?
FOR MAINS
What challenges might India face in implementing the service-related provisions of the India–UK CETA?
Why in the News?
India-UK bilateral annual trade ~USD 56 billion
Total merchandise trade ~ USD 23 billion
Total services trade ~ USD 33 billion
The agreement goes beyond goods and addresses services, a core strength of India’s economy. India exported over USD 19.8 billion in services to the UK in 2023, and CETA promises to expand this further In a first by UK, mobility for professionals across IT
healthcare, finance, and education is being eased with CETA providing for streamlined entry for Contractual Service Suppliers, Business Visitors, Intra-Corporate Transferees, Independent Professionals (e.g., yoga instructors, chefs, and musicians). Another major breakthrough is the Double Contribution Convention that will save Indian firms and workers more than INR 4,000 crore by removing the need for dual social security contributions.
With measures that promote mobility, innovation, and inclusivity, CETA is expected to create jobs, boost exports, and strengthen India–UK economic resilience.
In words of the Commerce and Industry Minister, Shri Piyush Goyal – “This FTA will serve as a catalyst for inclusive growth, benefiting farmers, artisans, workers, MSMEs, startups, and innovators while safeguarding India’s core interests and accelerating our journey towards becoming a global economic powerhouse.”
India has opened 89.5 % of its tariff lines, covering 91 % of UK’s exports, safeguarding sensitive sectors and strategically important products where domestic capability is being built. Elimination of duties will make a range of imported products more affordable for consumers, offering greater variety and quality at competitive prices.
Key Features of the Agreement
Key Features of the India–UK Comprehensive Economic and Trade Agreement (CETA)
| Feature | Details |
|---|---|
| 1. Comprehensive Tariff Elimination | – 99% of tariff lines for Indian exports to the UK to enjoy zero-duty access. – Key beneficiaries: Textiles, Leather, Marine Products, Gems & Jewellery, Toys, Chemicals, Engineering Goods, Agri-products. – Sensitive sectors protected: Dairy, cereals, millets, pulses, gold, certain vegetables, smartphones. – Gradual liberalization over 5–10 years for sectors aligned with Make in India and PLI schemes. – Bilateral safeguard measures to counter sudden import surges. |
| 2. Simplified Rules of Origin | – Exporters can self-certify product origin. – No origin certificate required for consignments valued below £1,000. – Product-Specific Rules (PSRs) customized for Indian supply chains. |
| 3. Boost to Services and Professional Mobility | – UK grants access in 137 sub-sectors (IT, finance, education, healthcare, etc.). – India grants access in 108 sub-sectors. – Temporary entry provisions for Indian professionals in 5 categories: ICTs, investors, Contractual Service Suppliers (CSS), etc. – No Economic Needs Test (ENT) or quotas on Indian professional movement. – 1,800 Indian cultural professionals (chefs, yoga instructors, musicians) allowed entry annually. |
| 4. Double Contribution Convention (DCC) | – Exemption from UK social security contributions for up to 3 years for Indian professionals and companies. – Beneficiaries: Approx. 75,000 workers and 900+ Indian companies. – Estimated savings: Over ₹4,000 crore (≈ USD 500 million). |
Sector-Wise Gains
India–UK CETA: Agriculture and Allied Goods
| Aspect | Details |
|---|---|
| Tariff Coverage | – 1,437 agriculture tariff lines (14.8% of total). – 985 food processing tariff lines (10.1% of total). – Extensive zero-duty market access for Indian agri and food products. |
| Trade Volume & Potential | – India’s agri exports (2022–23): USD 45.05 billion (up from USD 41.3 bn in 2020–21). – India’s global agri exports: USD 36.63 billion. – UK’s agri imports: USD 37.52 billion. – UK imports only USD 811 million worth of agri goods from India → huge growth potential. |
| High-Value Agri Exports to UK | – Tea, mangoes, grapes, spices, marine products, etc. – Indian farmers to fetch premium prices in UK market. |
| Processed Food Trade Potential | – India’s global processed food exports: USD 14.07 billion. – UK’s processed food imports: USD 50.68 billion. – Indian share in UK: USD 309.5 million only → large untapped market. – Exports of agri and processed food expected to rise by over 50% in next 3 years. |
| Market Parity Achieved | – India gains equal access with major exporters: EU, South Africa, Turkey, Canada, Peru, Vietnam. – Eliminates competitive disadvantage caused by UK’s FTAs with other nations. |
| India’s Competitive Gains | – Fresh Grapes: Compete with Brazil, Egypt, South Africa. – Processed Food Preparations: Compete with US, China, Thailand. – Bakery Products: Outdo US, China, Vietnam. – Preserved Fruits/Nuts: Beat Turkey, Pakistan, South Africa. – Chilled Vegetables: Outperform US, Brazil, China. – Prepared Sauces: Compete strongly with US, Japan, Malaysia. |
| State-Level Benefits | – Maharashtra: Grapes, onions. – Gujarat: Groundnut, cotton. – Kerala: Spices. – North-Eastern States: Horticulture. – APEDA’s State-specific agri-export plans aligned with FTA → equitable regional benefits. |
Plantation, Oilseeds, and Marine Products
| Sector | Key Features & Benefits |
|---|---|
| Plantation Sector (Tea, Coffee, Spices) | – Current UK Market Share: UK accounts for 1.7% of India’s coffee, 5.6% of tea, and 2.9% of spice exports. – Zero-duty access to the UK will catalyze exponential growth in these segments. – Instant Coffee Gains: Duty-free access gives level playing field against EU competitors (Germany, Spain, Netherlands). – Value Addition Focus: Boosts exports of Indian instant coffee and other value-added plantation products. |
| Oilseeds (Under IOPEPC) | – Market Expansion: UK presents new consumer base for Indian oilseed exporters. – Enhanced Competitiveness: Reduced tariffs and simplified processes improve cost competitiveness. – Opportunity for increased export volumes and wider global footprint. |
| Marine Products | – Current Export Volume: USD 8.09 billion (2022–23); major items: fish, shrimp, cuttlefish. – UK Demand: High-value UK market for frozen seafood like shrimp and white fish, driven by diaspora and demand for ready-to-cook items. – Tariff Elimination: Removes UK duties (4.2–8.5% range), increasing price realization and procurement rates for fisherfolk. – Employment Gains: Seafood processing units (especially in Kerala, Andhra Pradesh, Tamil Nadu) employ thousands of women. – Market Potential: UK’s marine imports: USD 5.4 billion; India’s share: just 2.25% → huge untapped potential. – Geographic Advantage: Coastal states like Kerala, Andhra Pradesh, Gujarat, Tamil Nadu, Odisha to gain from export-led growth. |
Engineering Goods
| Aspect | Details |
|---|---|
| Tariff Coverage | – 1,659 tariff lines – highest among all sectors, comprising 17.0% of total product lines. – Covers a wide range of items: machinery, components, equipment, etc. |
| UK Market Importance | – UK is India’s 6th largest engineering goods export market. – 11.7% export growth in 2024–25 over the previous year. |
| Trade Gap & Potential | – India’s global engineering exports: USD 77.79 billion. – UK’s engineering imports: USD 193.52 billion. – India’s exports to UK: just USD 4.28 billion → huge scope for expansion. |
| Export Doubling Outlook | – With tariff elimination (previously up to 18%), exports to UK could double to USD 7.5+ billion by 2029–30. – Aligns with India’s target of USD 300 billion in engineering exports by 2030. |
| MSME Support – Iron & Steel | – Zero tariffs improve price competitiveness and allow MSMEs to scale. – Greater access to UK’s industrial buyers. |
| Duty-Free Machinery Access | – Enhances MSME integration into UK supply chains in renewables, automotive electronics, industrial automation, etc. |
| Aerospace & Defence Push | – Full tariff liberalization supports Make in India in high-tech sectors like aerospace, defence manufacturing. |
| Growth Forecast (CAGR) | – Electric machinery, auto parts, industrial equipment, construction machinery expected to grow at 12–20% CAGR. |
| Strategic Role of UK | – UK’s cooperation is critical in helping India achieve USD 300 billion engineering export target by 2030. – The FTA cements UK’s role as a strategic trade partner. |
India–UK CETA: Gains in the Services Sector
1. Economic Significance: Services Sector Contribution: 55% of India’s GVA; 81% of UK’s economy.
India’s Trade Surplus: $6.6 bn (Exports: $19.8 bn, Imports: $13.2 bn).
Best-in-class FTA: One of the most ambitious service trade packages signed by the UK.
2. Market Access Commitments
India’s Gains: UK opened 137 sub-sectors across all 12 major service sectors, covering 99% of India’s interests.
Includes IT/ITeS, finance, healthcare, education, legal, telecom, aviation, etc.
UK’s Gains: India liberalized 108 sub-sectors—accounting, auditing, telecom (100% FDI), air transport services, and more.
3. Digital and Professional Benefits
IT & Digital Services: Indian firms benefit from simplified access to UK’s $200 bn digital services market.
Indian Start-ups: Gain from reduced compliance costs and broader access.
Global Capability Centres (GCCs): Boost to India’s position as a global service hub.
4. Professional Mobility
Mutual Recognition Agreements: Within 12 months—for professions like nursing, accountancy, architecture.
Temporary Entry Commitments:
Business Visitors: 90 days
Intra-Corporate Transferees: 3 years (+ extension)
Contractual Service Suppliers: 12 months in 24 (33 sub-sectors)
Independent Professionals: 12 months in 24 (16 sub-sectors)
No Economic Needs Test or numerical caps
Special Quota: 1,800 slots/year for Indian chefs, yoga instructors, classical artists.
5. Double Contribution Convention (DCC)
Eliminates dual social security payments for short-term assignments (up to 36 months).
Benefits 75,000+ Indian professionals and saves Indian firms ~$500 million/year.
6. Sectoral Highlights
IT/ITeS: Enhanced UK access, lower compliance, smoother talent mobility, push to emerging tech.
Start-ups: Easier scaling, fewer regulatory hurdles.
Healthcare & Education: Mutual collaboration, cross-border institutions, EdTech expansion.
Financial Services: Fair treatment, fintech growth, increased UK investments in India.
7. Strategic Safeguards by India: Sensitive sectors like dairy, cereals, gold, smartphones, automobiles, and MSMEs are protected. Calibrated tariff liberalization over 5–10 years in key sectors.
India–UK CETA: Cross-Sector Impact – Strengthening Resilience and Inclusive Growth
| Impact Area | Key Features & Benefits |
|---|---|
| Supply Chains & Competitiveness | – Streamlined trade procedures, reduced compliance burden. – Enhanced integration into global value chains (GVCs). – Labour-intensive sectors (textiles, footwear, processed food) gain duty-free access → boosts rural employment and production. |
| Digital Transformation & Innovation | – Strong focus on paperless trade, e-certification, and digital trade facilitation. – Benefits startups and MSMEs by making cross-border trade simpler and faster. – Provisions protect data privacy and consumer rights in the digital economy. |
| Green Growth & Sustainability | – Promotes environmental cooperation and clean technologies. – Encourages investment in renewables and sustainable production practices. – Aligns trade with climate and green growth objectives. |
| Skilling & Workforce Development | – Predictable mobility pathways for professionals/workers. – Supports skill development and knowledge exchange. – Mutual recognition of qualifications for engineers, architects, healthcare workers, etc. |
| Social & Economic Inclusion | – Focused on inclusivity: empowers women, youth, and under-represented groups. – Enhances access to global value chains for diverse communities. – Provisions on gender equality and innovation cooperation to ensure equitable trade benefits. |
Conclusion
The India–UK Comprehensive Economic and Trade Agreement (CETA) represents a landmark achievement in India’s trade diplomacy, combining economic ambition with strategic foresight. It not only opens up substantial opportunities across key sectors such as agriculture, engineering goods, and services, but also reflects India’s commitment to inclusive, green, and resilient trade. With provisions on tariff elimination, services liberalization, digital cooperation, and professional mobility, the agreement is poised to double bilateral trade by 2030 and significantly boost India’s export competitiveness.
Prelims Questions
Q. With reference to the India–UK Comprehensive Economic and Trade Agreement (CETA), consider the following statements:
1. The agreement covers both goods and services sectors.
2. India has secured access to the UK market in more than 130 services sub-sectors.
3. The agreement allows permanent residency to Indian professionals working in the UK.
Which of the statements given above is/are correct?
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: A
Mains Questions
Q. Discuss the major gains for India in the services sector under the India–UK Comprehensive Economic and Trade Agreement (CETA). How does this agreement support India’s broader strategic and economic objectives? (250 words, 15 marks)
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