India–UK trade deal takes effect: What gets cheaper and which sectors benefit the most — all you need to know

The India-UK Comprehensive Economic and Trade Agreement (CETA), which came into effect on Wednesday, is expected to boost bilateral commerce by reducing trade barriers and creating new opportunities for businesses of both sides.

For Indian exporters, the pact opens the door to the UK's procurement market, valued at around £90 billion annually. At the same time, Indian consumers are also likely to benefit from lower prices on several premium British products as import duties have been reduced under the agreement.

Who stands to benefit the most from India-UK CETA?

The India-UK CETA gives zero-duty access to nearly 99% of India's exports, covering almost the entire value of goods India sells there. This essentially means that all those Indian products that previously attracted import duties can now enter the British market duty-free, making them more competitive against goods exported to the UK from Germany, China, France and other nations.

“By granting zero-duty access on nearly 99% of India's exports, covering almost 100% of the trade value, the CETA is expected to strengthen India's export competitiveness,” the government said in a press release.

The biggest beneficiaries are certain individuals, labour-intensive sectors and businesses that employ millions of Indians. These include:

• Indian farmers and fisherfolk: Better access to the UK market through tariff elimination is expected to create new export opportunities and support incomes.
• Labour-intensive sectors: Sectors such as textiles, leather, footwear, gems and jewellery, handicrafts, food processing, auto components, plastics, and organic chemicals are poised to witness higher exports and job creation.
• MSMEs: Simplified customs procedures, paperless trade and digital systems are expected to reduce compliance costs. Duty-free access for 99% of Indian exports to the UK could also save 4-16% in tariffs on products such as textiles, leather, jewellery, footwear and food items.
• Skilled professionals: Improved access to the UK services market, mobility provisions and recognition of professional qualifications are expected to create new opportunities for Indian professionals and young talent.
• Women and entrepreneurs: The agreement includes provisions to encourage greater participation of women, youth and underrepresented groups in trade, innovation and entrepreneurship. It also reinforces commitments to internationally recognised labour rights, gender equality, and fair working conditions.

What gets cheaper for Indian consumers?

Consumers may not see prices fall immediately, but several imported British products are expected to become more affordable as tariffs are reduced in phases under the agreement. The extent and timing of the price cuts will largely depend on the tariff-reduction schedule and how much of the benefit is passed on by importers and retailers to consumers.

Some of the products that are expected to become cheaper after that tariff reduction include:

• Scotch whisky and gin.
• Premium British cars and luxury motorcycles
• Cosmetic products
• Chocolates and biscuits
• Medical devices
• Select food products

The price cut will not be immediate across all these products. While tariffs on some goods have been reduced from day one, others will see duties being reduced gradually over several years under the agreement.

For example, import duties on Scotch whisky and gin have been halved to 75% from 150% with effect from Wednesday and will decline further to 40% over the next decade. The immediate impact is expected to be lower prices for imported spirits, although the benefit to consumers will depend on how much of the duty savings companies and distributors pass on.

Which sectors are protected?

Sensitive sectors, including agriculture and strategically important industries, have been protected through exclusions or phased tariff reductions under the agreement to safeguard domestic producers. These include:

• Agriculture goods: Dairy products, cereals and millets, pulses, apples, edible oils, oats and vegetables remain protected under the pact.
• High-value products: Gold, jewellery, lab-grown diamonds, certain essential oils, critical energy fuels, marine vessels, worn clothing, critical polymers and monofilaments, smartphones and optical fibres are also protected.
• Strategic industries: Sectors being developed under the Make in India and Production-Linked Incentive (PLI) scheme will see tariff cuts introduced gradually over 5, 7 or 10 years, rather than on an immediate basis.

The pact marks India's first major free trade agreement with a developed economy to become operational in recent years. The government expects it to increase bilateral trade between the world's fifth- and sixth-largest economies to $100 billion by the year 2030.