By R. Suryamurthy
India’s Comprehensive Economic and Trade Agreement (CETA) with the United Kingdom is being celebrated as a historic milestone in bilateral relations. On the surface, the deal offers a windfall for Indian exporters—99% of India’s goods exports will now enter the UK duty-free. But beneath the surface lies a trade pact that chips away at India’s policy autonomy, compromises its ability to shield strategic sectors, and sets dangerous precedents for future free trade agreements (FTAs).
The tariff concessions are significant. Sectors such as textiles, footwear, and seafood—pillars of India’s labour-intensive exports—are poised to benefit from a projected 30–40% surge in shipments over the next three years. These gains will bring relief to export-oriented industries struggling with global demand slowdowns.
Yet, these headline-grabbing wins mask deeper compromises. For the first time in its trade history, India has slashed auto import duties to as low as 10% for UK-built passenger vehicles under a quota system. This is a radical departure from India’s long-standing policy of using steep tariffs to protect its automotive industry. British luxury carmakers like Jaguar Land Rover (ironically owned by Tata Motors) and Bentley stand to gain, but the real concern is the precedent this sets. With talks underway with the EU, Japan, and the U.S., India will find it harder to resist similar demands for tariff reductions in other FTAs.
CETA’s services chapter is one of the most comprehensive in any Indian FTA, covering 108 sub-sectors. India has opened critical segments of its services economy to UK firms, granting access in areas like accounting, auditing, financial services (with FDI in insurance capped at 74%), telecom (allowing 100% FDI), environmental services, and auxiliary air transport.
UK firms can now deliver telecom, construction, and related services without a local presence and will enjoy national treatment on par with Indian companies. India has also agreed to recognise UK professional qualifications in selected fields such as accounting and engineering, while legal services remain closed.
While this liberalisation reflects confidence in India’s services sector, it also exposes domestic players to competition from well-capitalised British firms. With the UK committing across 137 sub-sectors—covering nearly all of India’s services exports—areas like IT, consulting, financial services, education, and healthcare are expected to see an uptick. India’s surplus of over $5 billion in professional services trade with the UK could grow further.
The mobility provisions, however, remain limited. The UK has offered temporary entry for business visitors (90 days in six months), intra-corporate transferees (three years, extendable), and contractual service suppliers (12 months in 24 months). Yet, the annual quota of 1,800 visas for niche roles like yoga instructors and classical musicians is more symbolic than substantive. The UK’s refusal to restore post-study work visas for Indian students is a major disappointment.
A noteworthy achievement is the Double Contribution Convention (DCC), which exempts Indian professionals on short-term UK assignments from paying into Britain’s National Insurance system. This saves over 75,000 workers and 900 employers an estimated $500 million annually. But the absence of a full-fledged totalization agreement means structural mobility issues remain unresolved.
Perhaps the most consequential—and least debated—aspect of CETA is India’s concessions on intellectual property rights (IPR). For the first time in an FTA, India has explicitly agreed to incorporate “adequate remuneration” norms for compulsory licensing, in line with Article 31(h) of the TRIPS Agreement. While this may sound benign, it elevates royalty payments to patent holders from a multilateral obligation to a binding bilateral commitment, potentially restricting India’s policy flexibility.
Compulsory licensing has long been a cornerstone of India’s public health strategy. It allows the country to produce affordable generic versions of life-saving drugs during emergencies, ensuring public access to medicines at scale. The language in CETA subtly curtails this tool. By stressing transparency, adequate royalties, and voluntary licensing, India risks facing both domestic and international scrutiny if it chooses to invoke compulsory licenses in future crises.
The implications extend beyond pharmaceuticals. India’s renewable energy sector, which often relies on generic or reverse-engineered clean technologies, may find itself constrained by heightened IP obligations. The agreement’s push for FRAND (Fair, Reasonable, and Non-Discriminatory) terms and voluntary licensing mechanisms tilts the balance toward patent holders—typically multinational corporations—at the expense of public interest and local innovation.
India’s shift is particularly troubling given its traditional stance as a global leader in pushing for a fairer IP regime for developing countries. By embedding these concessions in CETA, India risks losing its negotiating leverage with other major trade partners. Future FTAs with the EU or the U.S.—both known for aggressive IP enforcement—are likely to demand similar or stricter commitments.
India’s decision to open up approximately 40,000 central government contracts to UK firms marks a watershed in its trade policy. Under CETA, UK suppliers with as little as 20% local content will be treated as “Class II” local suppliers, eligible to bid on India’s GeM platform and other procurement portals.
This move undermines India’s long-standing practice of using public procurement as a tool to bolster domestic manufacturing and MSMEs. With UK firms allowed to source up to 80% of their components from third countries, the core philosophy of Atmanirbhar Bharat and Make in India is diluted. Over time, foreign firms could outbid Indian companies in infrastructure and green energy projects, weakening local capacity-building efforts.
India’s failure to secure exemptions from the UK’s upcoming Carbon Border Adjustment Mechanism (CBAM) adds another layer of concern. Starting in 2027, carbon-intensive exports such as steel and aluminium could face punitive levies while UK goods enjoy duty-free access in India. This asymmetric framework threatens to erode the competitiveness of Indian manufacturers, particularly in heavy industries where energy transition costs are still high.
CETA is not a one-off episode. India’s recent FTAs—with the UAE and Switzerland—have shown a similar willingness to relax traditional red lines on tariffs, public procurement, and IP rights. As India engages in negotiations with the EU and the U.S., the concessions in CETA risk becoming a template that larger economies will exploit.
India may have won the tariff and services battle, but at what cost? While sectors like textiles and IT services may enjoy a short-term export boost, the strategic concessions on autos, procurement, and IP could have long-term implications for industrial policy and domestic job creation. MSMEs, the backbone of India’s economy, may struggle to compete with global players now enjoying preferential access to India’s government contracts and premium goods markets.
Supporters hail CETA as a testament to India’s rise as a global trade power. Yet, without complementary domestic reforms—upgrading product standards, strengthening MSMEs, and safeguarding critical sectors—the long-term fallout could be a hollowing out of local capacity.
The real test for India is not whether it can sell more seafood or IT services to the UK, but whether it can do so without trading away the policy levers needed to shape its economic destiny. (IPA Service)
