India has officially signed a Comprehensive Economic and Trade Agreement (CETA) with the UK, marking its 16th trade pact to enhance bilateral trade and investments. This agreement aims to significantly boost trade between the two nations, currently valued at approximately USD 56 billion, with a target to double this figure by 2030.

India’s portfolio of trade agreements includes partnerships with the four-nation European bloc EFTA, Japan, Korea, and Australia. Since 2014, India has entered into five trade pacts with Mauritius, the UAE, Australia, EFTA, and the UK.

A free trade agreement (FTA) is a treaty between two or more countries that eliminates or reduces customs duties on a wide range of goods traded among them. FTAs also aim to lower non-tariff barriers and facilitate services exports and bilateral investments. The scope of these agreements can cover 10 to 30 different subjects, with over 350 FTAs currently in force worldwide.

The benefits of FTAs include zero-duty access to partner markets, which helps diversify and expand export opportunities. They provide a level playing field against competitors from non-FTA countries and attract foreign investment to bolster domestic manufacturing. FTAs also facilitate access to raw materials and capital goods, contributing to long-term efficiency and consumer welfare.

India has previously signed trade agreements with several countries, including Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, Korea, Japan, Australia, the UAE, Mauritius, and the ASEAN bloc. Currently, India is negotiating trade agreements with the US, Oman, the European Union (EU), Peru, and Israel, while talks with Canada are on hold due to political issues.

The India-UK CETA is a landmark deal that will eliminate tariffs on labour-intensive exports such as leather, footwear, and clothing, while reducing import duties on whisky and cars from the UK. Specifically, India will lower the import duty on Scotch whisky and gin from 150% to 75% initially, with a further reduction to 40% by the tenth year. Tariffs on automotive imports will decrease from over 100% to 10% under specific quotas.

Key Indian sectors benefiting from duty-free access in the UK include textiles, clothing, leather, footwear, gems and jewellery, furniture, sports goods, processed food items, and other high-tariff products where India has a competitive advantage. Enhanced market access will also be granted in sectors like marine and animal products, vegetable oils, and chemicals, where India previously faced moderate tariff barriers.