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India–UK Comprehensive Economic And Trade Agreement 2026: Trade And Investment Cooperation

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Policy Update

Shivanshi

Background

The India–UK Comprehensive Economic and Trade Agreement (CETA) is a major bilateral agreement aimed at deepening trade, investment, and professional mobility between the two economies. Negotiations were formally launched in January 2022 and continued over roughly 15 rounds between 2022 and 2025 (UK Parliament, 2026). The agreement was signed on 24 July 2025 in London by India’s Commerce and Industry Minister Piyush Goyal and the UK’s then Secretary of State for Business and Trade Jonathan Reynolds, and came into effect on 15 July 2026 alongside a companion Agreement on Social Security (Double Contribution Convention, DCC) (PIB, 2026b).

CETA grants India zero-duty access on nearly 99% of its exports to the UK, covering almost 100% of trade value, with tariffs of up to 70% on processed food, 21.5% on marine products, 18% on engineering goods, 16% on leather and footwear, 12% on textiles, and 8% on chemicals eliminated (PIB, 2026a, 2026b).

In return, India has offered concessions on 89.5% of its own tariff lines, covering 91% of UK exports, with 24.5% of UK export value receiving immediate duty-free access (PIB, 2026a). CETA spans 30 chapters, including India’s comprehensive provisions on labour, environment, gender equality, anti-corruption, and development (PIB, 2026a; UK Parliament, 2026), and builds on the 2021 India–UK Roadmap 2030’s goal of doubling bilateral trade to USD 100 billion by 2030 (PIB, 2026b).

Functioning

The Comprehensive Economic and Trade Agreement is operationalised through a CETA Joint Committee, five sub-committees, and ten working groups covering standards, customs, IP, and professional-services recognition (UK Parliament, 2026). Trade facilitation measures such as the Single Window system, Authorised Economic Operator (AEO) recognition, and under-48-hour customs clearance commitments, are expected to lower compliance costs for MSMEs (PIB, 2026a).

Rules of Origin: RoO functioning deserves particular attention given its bearing on India’s manufacturing supply chains.  Both the UK Parliament report and ORF flag that product-specific RoO conditions will require close review, since India’s electronics, electrical machinery, automotive components, and pharmaceutical sectors depend heavily on imported intermediate inputs, a substantial share of which originate in China (ORF, 2026).

If Indian manufacturers use Chinese-origin inputs beyond the thresholds permitted under CETA’s origin rules, the finished goods lose eligibility for preferential UK tariffs altogether (ORF, 2026). This creates a structural tension: sectors with the deepest Chinese input-dependence such as electronics assembly, auto components, and generic pharmaceutical intermediates are precisely those where RoO compliance risk is highest, potentially limiting the practical uptake of tariff preferences even where nominal duty elimination exists. The UK Government’s own impact assessment separately notes that its RoO rules are stricter than in previous UK FTAs, and has assumed some exporters on both sides will not fully utilise the preferences on offer (UK Parliament, 2026).

Beyond RoO, both governments face functioning-stage friction. The UK ‘s Business and Trade Committee (2026) identified 479 Indian regulations comprising 4,618 individual non-tariff measures across 38 agencies, including expanding Quality Control Orders and export health certification requirements. ORF (2026) similarly notes that Indian exporters must meet UK Sanitary standards, chemical-residue testing, and traceability norms, areas where certification infrastructure for smallholder farmers and MSMEs remains underdeveloped. Mutual Recognition Agreements (MRAs) for nursing, accountancy, and architecture are due to be scoped within 12 months of entry into force, with negotiation ideally concluding within three years thereafter (UK Parliament, 2026), a longer runway than commonly assumed.

Baseline Performance and Expected Outcomes

Since CETA entered into force only on 15 July 2026, fewer than a month before this update, actual outturn data remains extremely limited. The figures below should therefore be read carefully, distinguishing pre-CETA baseline performance (actual) from post-CETA outcomes (projected/modelled).

Actual, pre-CETA baseline performance: Merchandise trade between India and the UK stood at USD 25.12 billion in 2025–26 (exports: USD 13.44 billion; imports: USD 11.68 billion), a trade surplus of USD 1.76 billion; services trade reached USD 35.44 billion in 2024, with a USD 7.88 billion services surplus for India (PIB, 2026a). Engineering goods exports to the UK grew 11.7% in 2024–25, a real, already-realised increase that predates CETA’s entry into force (PIB, 2026a). The UK remains India’s 6th largest source of inward investment (cumulative equity of USD 35 billion as of September 2024), and 971 Indian companies already operate in the UK against 667 British companies in India (PIB, 2026a).

Projected/modelled post-CETA outcomes: Engineering exports are projected to exceed USD 7.5 billion by 2029–30;  jewellery exports could potentially double within 2–3 years; IT/ITeS exports are forecast to grow 15–20% annually (PIB, 2026a), none of these are yet observed outcomes. On the UK side, the Government’s own Computable General Equilibrium modelling (not yet realised trade flows) projects UK GDP rising by £4.8 billion (0.13%) by 2040, with UK exporters’ duty savings estimated at £398 million in Year 1, rising to £889 million by Year 10, and Indian exporters’ duty savings estimated at £221 million, concentrated in textiles (UK Parliament, 2026).

These modelled estimates assume full utilisation of tariff preferences on 2022 trade flows and explicitly exclude dynamic effects such as investment shifts or supply-chain reconfiguration (UK Parliament, 2026), meaning actual outcomes could diverge meaningfully, particularly given the UK’s own historical preference-utilisation rates with other FTA partners range from 44% (Switzerland) to 92% (Turkey) (UK Parliament, 2026).

Impact

Textiles gain zero-duty access on 1,143 tariff lines, closing the tariff gap with Bangladesh, Pakistan, and Cambodia (PIB, 2026a). Leather and footwear exports (USD 494 million in 2024) could conservatively exceed USD 900 million, benefiting clusters in Uttar Pradesh, Tamil Nadu, West Bengal, and Delhi NCR (PIB, 2026a). Marine products stand to gain from the removal of UK tariffs that earlier ranged 4.2–8.5% (PIB, 2026a). Jewellery exports could double within 2–3 years, given access to the UK’s ~USD 4-billion jewellery import market (PIB, 2026a). Government procurement access opens a GBP 90 billion (USD 122 billion) UK market to Indian suppliers (PIB, 2026a).

IT, ITeS, and business-process services: India’s largest structural advantage. Exports are projected to grow 15–20% annually (PIB, 2026a; ORF, 2026). The removal of the UK’s Economic Needs Test for Indian professionals reduces mobility uncertainty for this workforce specifically (PIB, 2026a).

Professional and financial services: CETA includes a dedicated Financial Services chapter enabling Indian firms to deliver financial services to UK clients on non-discriminatory terms, expected to support growth in electronic payments and fintech (PIB, 2026a). However, the UK’s own assessment cautions that CETA does “much more for goods than for services,” delivering limited new UK market access into India and mostly locking in existing conditions (UK Parliament, 2026).

For architecture and accountancy specifically, the absence of a concluded Mutual Recognition arrangement remains a live constraint on trade until the Professional Services Working Group delivers results (UK Parliament, 2026). Notably, legal services were excluded from the agreement entirely, a gap flagged by the Law Society of England and Wales as a missed opportunity (UK Parliament, 2026).

Temporary movement of professionals: CETA’s mobility framework covers five defined categories, Business Visitors (90 days/6 months), Intra-Corporate Transferees (3 years, all sectors), Investors (1 year), Contractual Service Suppliers (12 months/24-month period, 33 sub-sectors), and Independent Professionals (12 months/24-month period, 16 sub-sectors) (PIB, 2026a). This is supplemented by the DCC, eliminating dual social-security contributions for assignments up to 60 months (PIB, 2026a).

Why this matters strategically: The services chapter is where the most durable long-term complementarity between the two economies lies, even though its near-term commercial value, per UK Parliament’s own assessment, will depend heavily on whether MRA negotiations actually deliver within the agreed timelines.

Emerging Issues

Three implementation challenges stand out as most consequential for India’s ability to realise CETA’s gains:

  1. Rules of Origin and China-linked input dependence: Electronics, automotive components, and pharmaceutical intermediates rely heavily on Chinese inputs; exceeding CETA’s origin thresholds disqualifies exporters from preferential tariffs entirely, potentially neutralising nominal duty gains in precisely the sectors where India seeks diversification (ORF, 2026).
  2. Compliance and certification capacity gaps for MSMEs and smallholders: UK traceability, SPS, chemical-residue, and labour-audit requirements demand testing and certification infrastructure that remains underdeveloped for India’s marginal producers, risking a two-tier outcome where only larger exporters can use the preferences (ORF, 2026).
  3. Pending Mutual Recognition Agreements: the practical value of India’s services gains is contingent on MRAs for nursing, accountancy, and architecture, negotiations for which may extend up to three years post-scoping, meaning India’s strongest comparative-advantage sector may see delayed returns (UK Parliament, 2026).

Several Indian export sectors gain tariff parity with ASEAN competitors (ORF, 2026), and the labour, environment, and gender chapters currently lack binding dispute-settlement mechanisms (UK Parliament, 2026).

Way Forward

The Comprehensive Economic and Trade Agreement pairs near-total tariff coverage with calibrated protection for sensitive sectors and forward-looking commitments on gender, sustainability, and inclusive growth (PIB, 2026a). Achieving the shared USD 100-billion trade target by 2030 (PIB, 2026b), however, will depend on effective implementation rather than tariff liberalisation alone. India should therefore prioritise following areas of action:
  • Establish CETA facilitation cells through DGFT and Export Promotion Councils to provide exporters,  particularly MSMEs, with RoO guidance, documentation support, and preference-utilisation tracking, an approach ORF (2026) explicitly recommends.
  • Subsidise international certification costs for MSMEs seeking UK market access, reducing the entry barrier posed by SPS, traceability, and social-audit compliance (ORF, 2026).
  • Expand internationally accredited testing laboratories in key export clusters (textiles, marine, leather, engineering) to reduce dependence on costly overseas certification (ORF, 2026).
  • Fast-track MRA negotiations for nursing, accountancy, and architecture within the 12-month scoping window rather than the full three-year window permitted, to accelerate India’s services gains (UK Parliament, 2026).
  • Develop digital traceability systems geolocation and digital batch-logging platforms for agricultural and marine supply chains to meet UK documentation requirements (ORF, 2026).
  • Monitor and publish preference-utilisation rates, mirroring the transparency the UK Parliament (2026) has itself recommended for UK exporters, to identify where Indian exporters are failing to access agreed tariff preferences and why.
  • Establish a bilateral mechanism to flag and resolve emerging non-tariff barriers such as new UK regulatory measures through the CETA Joint Committee’s Sub-Committee on Standards, Technical Regulations and Conformity Assessment, ensuring issues are surfaced and addressed before they compound (UK Parliament, 2026).

Selected References and Important Links

About the Contributor

Shivanshi is a Research and Editorial Intern at the Impact and Policy Research Institute (IMPRI) and a recent graduate in Political Science from Miranda House, University of Delhi. Her research interests include international relations, public policy and governance.

Acknowledgement 

The author extends sincere gratitude to IMPRI India for its valuable guidance and support. 

Reviewers

Kavin and Nayanshi

Disclaimer 

All views expressed in the article belong solely to the author and not necessarily to the organisation.

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