India and the United Kingdom on July 23, 2025, sealed the Comprehensive Economic and Trade Agreement (CETA), a sweeping free trade deal hailed as a “watershed moment” for bilateral relations. While the pact offers unprecedented duty-free market access and new avenues for economic cooperation, analysts warn that the agreement’s benefits may not be evenly distributed and could trigger competitive disruptions across several sectors.
India’s Big Win: Manufacturing, Services, and Agri-Exports
India emerges as the early winner, with 99 percent of its tariff lines gaining zero-duty access to the UK market, covering virtually all trade value. This liberalization is expected to significantly boost India’s labor-intensive manufacturing base, particularly in textiles, clothing, leather, and footwear—sectors previously facing tariffs of up to 16 percent. Industry groups project a 30-40 percent jump in textile and apparel exports alone over the next three years, strengthening manufacturing clusters in states such as Tamil Nadu, Uttar Pradesh, and Punjab.
Marine products will see an immediate lift, with UK import duties of up to 20 percent reduced to zero, providing a major fillip to India’s $8-billion seafood sector. Similarly, agricultural exports—spices, tea, coffee, fruits, vegetables, and processed foods—stand to benefit from steep tariff cuts that once reached 70 percent, supporting rural income and agri-processing industries.
The services sector, a cornerstone of India’s economy, gains robust commitments in IT, financial services, architecture, engineering, and consulting. Provisions easing professional mobility, including exemptions from UK social security contributions for up to three years, are expected to benefit over 75,000 Indian professionals and reduce costs for Indian firms.
UK’s Strategic Push and Sectoral Risks
The UK, grappling with post-Brexit trade realignments, projects a 60 percent surge in exports to India by 2040—roughly £15.7 billion in additional trade. Machinery, chemicals, and premium sectors such as motor vehicles and Scotch whisky are set to benefit most. Indian tariffs on UK whisky, currently 150 percent, will fall to 40 percent over a decade, potentially boosting beverage exports by 180 percent. Similarly, motor vehicle tariffs—now as high as 110 percent—will be reduced to 10 percent within quotas, providing a lifeline to UK automakers.
However, London’s own impact assessment highlights downside risks. UK imports from India are forecast to jump by 25 percent (£9.8 billion) by 2040, with textiles, leather, and apparel imports rising 85 percent compared with a no-deal scenario. This sharp influx could intensify competition for UK producers, potentially leading to market displacement.
Strategic and Long-Term Implications
Beyond trade figures, the deal is positioned as a strategic partnership aimed at strengthening supply chains, advancing sustainable trade practices, and fostering joint ventures in sectors such as green energy and fintech. Over 970 Indian companies already operate in the UK, and the agreement is expected to deepen investment flows and technology collaborations.
For India, the pact could accelerate its path toward becoming a global manufacturing and services hub. Yet, experts caution that success will hinge on improving competitiveness, ensuring quality standards, and scaling up MSME participation. For the UK, the challenge lies in balancing the benefits of market access with the impact of heightened competition in domestic sectors.
As India and the UK celebrate this milestone, the broader question remains: can both economies adapt fast enough to fully capture the benefits while mitigating the disruptive effects? The answer may shape the trajectory of future trade negotiations, including India’s long-pending deal with the European Union.