India-UK CETA to buoy bilateral trade and investment

India and the United Kingdom on Thursday signed a Comprehensive Economic and Trade Agreement (CETA) that will eliminate or drastically reduce tariffs on a whole range of goods and services, thereby ensuring market access across sectors of the two countries.

The CETA, signed during Prime Minister Narendra Modi’s visit to the UK, offers to reduce tariffs on 99 per cent of India’s exports to UK, especially in the labour-intensive sectors, while drastically reducing tariffs on high-value exports from the UK to India. 

The agreement, signed in the presence of Prime Minister Narendra Modi and UK Prime Minister Keir Starmer, eliminates duties on 99.7 per cent of India’s exports to the UK, bringing current tariffs on items like marine products (20 per cent), textiles and clothing (12 per cent) chemicals (8 per cent), base metals (12 per cent) to zero per cent.

Besides the immediate benefits of increased bilateral trade, the tariff measures will open up investment opportunities across various sectors such as agriculture, food processing, chemicals, pharmaceuticals, textiles, engineering goods, electronics, and marine products and give a big boost to job creation in both countries.

The biggest beneficiary of the CETA would be the Indian farmer who will get access to a promising market for his products like vegetables, fruits, basmati rice, cereals, meat products, beverages, oil seeds, and dairy products. 

The agreement is also expected to give a fillip to small and medium industries, especially that are labour-intensive, such as leather, textiles, gems and jewellery, furniture, and sports goods

The CETA also provides for remedies against arificial technical and phytosanitary barriers to trade.

Under the free-trade agreement, Indian IT companies will get exemption from paying social security contributions for Indian employees deployed in their UK centres, for the next three years. This will benefit about 900 Indian companies, including TCS and Infosys, covering over 75,000 employees, said commerce and industry minister Piyush Goyal. 

While this relief, under the Double Contribution Convention (DCC), is applicable to temporary workers from both countries, Indian companies are expected to benefit more as the UK is the second-largest market for Indian IT software companies, currently worth around $48 billion.

The agreement expands the potential for collaboration in the chemicals and pharmaceuticals sector, especially in collaborative research and increasing exports. While this will give a boost to India’s export earnings, it will strengthen UK’s healthcare ecosystem by making available quality generic medicines.

This comprehensive agreement aims at mutually beneficial economic engagement that would bring prosperity and ensure secure, and sustainable growth in a rapidly evolving world.

The CETA goes beyond trade and investments and envisages a broader and deeper mutually beneficial partnership across all areas of mutual interest. The India-UK Vision 2035 hopes to create a deeper partnership in education, technology, talent development and investment while ensuring market access, jobs and economic growth in both countries.

The partnership will focus on developing cutting-edge technologies across areas like telecoms, AI and critical minerals, semi-conductors, quantum, bio-technology and advanced materials and technology security for the future.

It provides for a partnership focused on accelerating clean energy adoption and mobilising finance for climate action.

The India-UK Vision 2035 also envisages defence and security cooperation, including high-level political engagement with a common commitment to peace, security and prosperity.