India-UK trade deal
India and the UK signed the Comprehensive Economic and Trade Agreement (CETA) on 24 July.
India and the United Kingdom signed the Comprehensive Economic and Trade Agreement (CETA) on 24 July 2025 during Prime Minister Narendra Modi's official visit to the United Kingdom. The historic agreement is expected to push bilateral trade and investment to new levels, create jobs and drive economic growth. The agreement is not only significant in that it deepens the India-UK strategic partnership, but it also occurs at a time of uncertainty over the tariff policy of US President Donald Trump. The agreement opens many doors for development, but it leaves a significant question hanging in the balance -- the carbon tax levied by the UK, which may impact India's carbon-intensive exports to the country.
The trade deal aims to double the bilateral trade from $56 billion to $112 billion in five years, a target that is of gigantic significance to both countries. The deal covers sectors ranging from agriculture to food processing, textiles, and manufacturing. It creates new opportunities for Indian businesses, small and medium enterprise in the main, to tap British markets, as British products, from medical devices to car spares, become accessible to Indians.
However, the deal is not just about numbers; it shows the broader political and economic alignment between the two countries. Having left the EU with Brexit, Britain is eager to position itself at the centre of international trade, and this deal with India is central to that vision. It helps the UK diversify its trade relationships, reduce its dependence on the European Union, and build more links with such emerging powers as India.
The India-UK trade agreement is also of crucial significance to India in the broader scheme of its international trade policy. Although the UK has quit the EU, nearly half of its trade continues to be with EU countries. India has been discussing a free trade agreement with Europe for decades, and the UK deal could serve as a strep towards it. The agreement, while bilateral, creates a healthy setting for India to negotiate improved terms with the European Union in the future.
However, one of the most contentious issues is Britain's Carbon Border Adjustment Mechanism (CBAM), set to come into force in 2027. The CBAM will impose carbon duties on specific imports, such as steel, aluminum, and cement, commodities with a significant Indian export interest. Indian industries may therefore incur higher costs.
Strategically, this agreement is about a more powerful India-UK partnership, one that is greater than trade. The pact will likely create new opportunities for collaborative ventures in high-tech industries such as artificial intelligence, biotechnology, and semiconductors.
Overall, while the India-UK free trade agreement is a milestone for bilateral cooperation, it is also full of challenges to be carefully overcome.
